Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — ENVIRONMENT

Right to Buy

Dr. Spink: To ask the Secretary of State for the Environment how many council tenants have now taken advantage of the Government's right-to-buy policy.

The Minister for Housing, Inner Cities and Construction (Sir George Young): More than 1·5 million public sector tenants have bought their homes since 1979, of whom 1,140,000 have bought under the right to buy.

Dr. Spink: Does my right hon. Friend' agree that the extension of home ownership has been one of the great developments of recent times? Will he press forward with his large-scale voluntary transfer initiative and look sympathetically at the application from Castle Point borough council, under that initiative, to transfer the whole of its small estate of council houses to the private sector, where the tenants will be well served?

Sir George Young: On the first point, I can confirm that introducing the right to buy has been one of our party's greatest achievements—so great that others have been obliged to copy it. On the second point, large-scale voluntary transfers bring real benefits to tenants and local authorities. We have received 14 applications for next year's programme, including the one from my hon. Friend's local authority. I am looking at the applications at the moment and expect to announce next year's programme in mid-December.

Mr. Betts: Would the Minister be surprised to learn that I was informed by a major building society yesterday that it had not yet received a single inquiry about the Government's rent-to-mortgage scheme? Is it not time that the Government set aside such gimmicks, which do nothing for the provision of social housing? Should not the Government concentrate on putting resources into the social housing sector, rather than making cuts of £300 million to the Housing Corporation, which we heard about yesterday, which will destroy the opportunities for homeless families and lead to the withdrawal of funding by major institutions because they do not believe that schemes will be viable on that basis in the future?

Sir George Young: On the hon. Gentleman's first point, he may regret calling the rent-to-mortgage scheme a gimmick. It brings home ownership within the reach of those local authority tenants not on housing benefit. All the

surveys that we have carried out indicate that such tenants would like to be home owners, and the scheme brings it within their reach. As with the right to buy, the Labour party will be obliged to do a U-turn on the rent-to-mortgage scheme and introduce it as part of its election manifesto. The rent-to-mortgage scheme only came on stream in early November, so it does not surprise me that the particular building society that the hon. Gentleman mentioned has not processed an application. The large majority of council tenants will find the scheme attractive.
On the hon. Gentleman's final point, we will more than honour the undertaking that we gave in our manifesto commitment to provide at least 150,000 new homes through the Housing Corporation. That commitment will be exceeded by approximately 20,000.

Mr. Whittingdale: Is my right hon. Friend aware that local authorities in Essex are leading the way in taking advantage of the large-scale voluntary transfer scheme? I hope that, in addition to looking favourably at the application from the local council of my hon. Friend the Member for Castle Point (Dr. Spink), he will approve the application that he will shortly be receiving from Maldon district council in my constituency.

Sir George Young: The assertion that Essex leads the way in this area was challenged by a number of my hon. Friends on the Front Bench who come from Suffolk, where there have been a number of successful large-scale voluntary transfers. I will look sympathetically at the application made by my hon. Friend's local authority. As I have said, I shall come to a decision on next year's programme in the middle of this month.

Mr. Pike: The Labour party has always been in favour of extending the advantages of home ownership to as many people as possible—[Interruption.]—as the record of the 1964-70 Labour Government shows. Does the Minister accept that many people who are buying their council houses believe that it would be right and sensible for their local authorities to be able to use those capital receipts for housing purposes? Why are the Government now stopping the use of those capital receipts?

Sir George Young: I can only admire the courage of the hon. Gentleman's assertion. Many of us were in the House between 1979 and 1983, when the right-to-buy legislation went through. The hon. Gentleman's party fought it tooth and nail.
The assertion that the Labour party has always nurtured an ambition to bring home ownership within the reach of more people bears no relation to the facts. It so happens that I have with me an article from Roof magazine, giving the views of a younger hon. Member for Blackburn (Mr. Straw), expressed in 1981. The article is entitled "My Vision for Housing". The hon. Gentleman's first vision was expressed thus:
Repeal the law which allows tenants to buy their council houses.

Charter Markets

Sir Michael Neubert: To ask the Secretary of State for the Environment what representations he has received in response to his consultative paper on charter markets.

The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry): We have received a variety of representations both for and against our proposals and are carefully considering whether to introduce legislation to remove from local authorities the right to object to the establishment of new markets within the common law distance of 6⅔ mile.

Sir Michael Neubert: Is my hon. Friend aware that a proposal in the name of competition to abolish without compensation the centuries-old charter rights of markets such as Romford market in my constituency while leaving intact the rights of private market operators would lack a certain conviction? Does not the rapid growth of unregulated temporary markets and car boot sales now provide a major outlet for the sale of stolen property? Is not that a much greater threat to fair competition, and should not dealing with it be the Government's priority?

Mr. Baldry: I think that there has been something of a misunderstanding. It is being suggested that the proposals would in some way remove such markets, which certainly is not the case: local authorities would continue to own and operate them. All that we are considering removing is the arbitrary power of local authorities to exercise a monopoly right over any rival operator who seeks to bring new trade to an area. I have no doubt that traditional markets that have stood the test of time over the centuries will continue to do so, and to compete with the best.

Mr. Jim Marshall: Does the Minister accept that the vast majority of local authorities oppose the revocation of charter rights? Will he confirm that he has received many representations from people who trade at local authority markets, and that those people are opposed to the revocation? As there is no evidence that local authority charter rights act against the public interest, will the Minister ensure that deregulation does not include their revocation?

Mr. Baldry: It is worth recalling that many local authorities—by my reckoning, well over 150—have no such market rights, but they seem to manage perfectly well using their planning powers. It is also interesting to hear Labour Members defending ancient privileges granted by the Crown.

Water Charges (South-west)

Mr. Nicholls: To ask the Secretary of State for the Environment what assessment he has made of the relative level of water charges in the south-west.

The Minister for the Environment and Countryside (Mr. Tim Yeo): Water prices are a matter for the Director General of Water Services. However, the Government are aware that South West Water's charges for water and sewerage are among the highest in the country, and have been in discussion with the company and others about ways in which prices can be restrained.

Mr. Nicholls: I thank my hon. Friend for his reply. Will he acknowledge the real feelings of outrage that I, with other west country Conservative Members, have been expressing for the past three years about the level of water charges? Will he give an assurance that he will continue his

efforts—particularly in any European context—to ensure that the burdens imposed on west country people are not greater than those people can bear?

Mr. Yeo: I am happy to give my hon. Friend an absolute assurance to that effect. I have been deeply impressed by his long-standing, determined and realistic approach to minimising the costs of providing consumers throughout the south-west with higher water standards. He and other Conservative Members from the west country were making a constructive contribution to this debate long before the Liberal party jumped on the bandwagon. I only regret that their realism is not shared by the Liberal party. I am, however, glad to be able to assure the right hon. Member for Berwick upon Tweed (Mr. Beith)—who, unfortunately, is not present—that my right hon. Friend the Secretary of State resisted the demand made by the right hon. Member for Yeovil (Mr. Ashdown), at a recent meeting at the Department of the Environment, for the costs of improving water around the south-western coast to be borne by constituents in Berwick upon Tweed.

Mr. Matthew Taylor: Will the Minister confirm comments made by the Secretary of State at a private meeting with the Liberal Democrats in the past week that he is considering ending the present extremely unfair water rate system and replacing it with another means of payment possibly, as we have suggested, based on the council tax? If so, will that system include discounts for those living alone and those on low incomes as we have proposed?

Mr. Yeo: It is a pity that the privacy of the meeting was not recognised by the hon. Gentleman and his colleagues, who immediately spoke to the press. The account that they gave to the press was inaccurate in almost every particular. While my right hon. Friend said that he would examine any possibility, he gave no assurance of the sort that has been described. It is clear that the Liberal Democrats are converting hypocrisy into an art form. The stench that the issue is causing is wafting beyond the Chamber to the homes of people throughout the south-west. First, the Liberal Democrats proclaimed a commitment to cutting green house gases and followed it with an absolute refusal to support any measure designed to achieve that. Now, even more fragrantly, they are demanding cleaner water and lower prices in the same breath.

Mr. Matthew Taylor: On a point of order, Madam Speaker. In view of the unsatisfactory nature of the reply, I shall seek a further opportunity to raise the issue.

Mr. Yeo: I shall be only too happy to debate the matter in detail with the Liberal Democrats—

Madam Speaker: But not now.

Pollution

Sir Thomas Arnold: To ask the Secretary of State for the Environment when he expects to meet his EC counterparts to discuss pollution.

Mr. Yeo: I am attending the Environment Council tomorrow and Friday, when I expect to discuss a wide range of environmental matters.

Sir Thomas Arnold: Will my hon. Friend confirm that the Government will honour their commitment to ratify the climate change convention soon, even if other European Community members fail to do so?

Mr. Yeo: I am very hopeful that discussions at this week's Council will enable those countries at present obsessed with forcing a carbon energy tax on the European Union to overcome their difficulties and allow joint ratification to take place. If not, Britain will certainly honour its commitment to ratify the climate change convention before 31 December.

Mr. A. Cecil Walker: When the Minister meets his EC counterparts, will he make them aware of the terrible pollution problems in Belfast as a result of coal-burning appliances?

Mr. Yeo: I am grateful to the hon. Gentleman for raising the matter and I am certainly ready to discuss it in the EC. I am glad to say that positive progress been made recently in Geneva in the sulphur-burning emission negotiations and I am confident that an agreement will be reached on terms satisfactory to this country and other countries in the next few days.

Mr. Marland: Does my hon. Friend agree that there is currently confusion in the EC about the definition of waste and that this is frustrating the work of many pollution-controlling and recycling businesses? I know that my hon. Friend is anxious to find a cost-effective way to clean up the environment and keep it clean. Will he continue to press for a more realistic definition of waste which identifies harmful material to be discarded and material to be reclaimed that can be successfully reused?

Mr. Yeo: I know of my hon. Friend's close interest in the subject. He has been to see me to discuss it recently. The definition of waste is a complex matter, as one man's waste may be another man's raw material and demand for recycled material depends on the state of the market and prices being held for recycled material at any time. I take note of my hon. Friend's comments.
We are wrestling with the complex task of reconciling our existing laws with the requirements of certain EC directives. In that context, I was glad to announce recently that we shall be introducing a waste management licensing system on 1 May next year.

Mr. George Howarth: Are not the Government seeking to weaken or repeal at least three important EC directives—on nitrates in drinking water, on sewage in bathing water and on nitrogen dioxide in the atmosphere—and is not the cause of that nothing to do with any failure on the part of the directives but a failure on the part of the Government? On at least two occasions, they have been taken to court and lost cases arising out of those directives. Instead of wriggling out of their responsibilities, when will the Government face up to their responsibilities and clean up their act?

Mr. Yeo: In welcoming the hon. Gentleman to his new position, I express the hope that by the next Environment Question Time he will be better informed about the subject that he has raised. Our position on the drinking water directive is driven by two considerations. The first is the proper application of the subsidiarity principle which, if rigorously applied, would mean that there would be no need for a directive on drinking water. Secondly, given that

we are trying to improve the drinking water directive, we intend to apply the latest scientific research results produced by the World Health Organisation. That is the only point of difference between us and the EC at present.
On nitrates—I am sorry, nitrogen—[Interruption.] I am getting the facts right: I was about to read them out. The fact is that the United Kingdom record compares remarkably well with that of the rest of the Community. In the period from 1988 to 1992, the number of infraction referrals in each member state was: Italy 12, Belgium 11, Germany 8, France 5, Greece 4, Netherlands 3, Luxembourg 2 and the United Kingdom 1. On Mat criterion, it appears that Britain has an exemplary record in the Community.

Energy Conservation

Mr. David Shaw: To ask the Secretary of State for the Environment what assistance his Department is giving towards the introduction of energy conservation in domestic households.

The Secretary of State for the Environment (Mr. John Selwyn Gummer): I am delighted that my right hon. and learned Friend the Chancellor of the Exchequer was able to announce yesterday an extra £35 million a year for the home energy efficiency scheme, which will bring the total amount provided through similar organisations to more than £70 million.

Mr. Shaw: I thank my right hon. Friend for that reply. Will he confirm that the Government's energy efficiency and conservation schemes have been better than those of any previous Government and that the current one is the best ever? Will he confirm that some 500,000 homes are now eligible to receive benefits under the scheme and that that is good news for large numbers of pensioners and disabled people and for some 1,500 people who will find jobs as a result?

Mr. Gummer: My hon. Friend is right to praise the Government's record. Perhaps through a slip of the tongue he said that 500,000 homes were eligible. In fact, 500,000 homes will have the work completed in any one year. About 4 million homes will be eligible. The scheme will mean that any pensioner who has concerns about insulation will be able to seek support. It is a remarkable achievement and it bears considerable advantage over any achievement of any previous Government.

Dr. Lynne Jones: As the Secretary of State has confirmed, it will take at least 10 years to insulate the 5 million or 6 million homes that require such insulation. Has he done any work to estimate the length of time that it would take to bring homes up to the standard of heating and insulation that obtains in countries such as Sweden and Canada, which do not have the large number of excess deaths of elderly people in winter?

Mr. Gummer: I am surprised that the hon. Lady asks that question, as we are spending in real terms 17 times what the Labour Government spent in its last year. She should not try to mix the figures. She might also try to remember that there is a distinction between homes that are eligible and homes that need action. Obviously, many pensioners' homes have already had insulation work done to them or are already suitably insulated. It would be a


great pleasure for the people of Britain if occasionally the hon. Lady cheered when things were done well instead of constantly whingeing on.

Mr. Robert B. Jones: My right hon. Friend will have received the report of the Environment Select Committee on energy conservation published on Friday. We look forward to a response from the Government in due course. In the meantime, I welcome the doubling of the home energy efficiency scheme yesterday and the extension of its scope and, before that, the abolition of the client contribution. That was a terrific achievement. Does he agree, however, that the complacency of many better-off people and their failure to respond to market signals and the national commitment to the environment are a disgrace? Would we not be better educating them into improving their own performance?

Mr. Gummer: I must point out to my hon. Friend that the energy saving campaign that we have just introduced has been one of the most successful Government campaigns ever. It is one of the top 20 in recall factors, thereby showing itself to be a very effective advertising campaign to do precisely what my hon. Friend says. I hope that my hon. Friend will also agree that those parties represented here—particularly the Liberals, who always talk about taxation to deal with the overuse of energy—should stop being hypocritical and support the tax system, as it will reduce the overuse of energy while giving proper support to those who cannot afford it.

Mr. Chris Smith: The additional resources announced yesterday for the home energy efficiency scheme are of course welcome, but does the Secretary of State not realise that the Chancellor is devoting less than 1 per cent. of Exchequer revenue from VAT on fuel to the addition that was announced? Does the Secretary of State not realise that the HEES is very limited in the help that it gives? For example, it does nothing about cavity wall insulation. Moreover, at the same time as he trumpets that achievement, he has cut the green house programme by £45 million in the past year. And while we are at it, why do the Government not start by putting their own house in order? Is he aware that in the past year the Department of Trade and Industry increased its energy use by 24 per cent. and the Cabinet Office by 10 per cent?

Mr. Gummer: I think that it would have been more accurate if the hon. Gentleman had read out the whole list. He would then have seen that we are well on course for a 15 per cent. reduction overall and that green Ministers in each Department are committed to that—[interruption.] The sad thing about Labour Members is that they are only interested in green matters when they think that they can win a vote or two. They are not prepared to pay the cost. The hon. Gentleman is in no position to talk about the amount of money that has been spent on energy efficiency when, as I mentioned, we have spent 17 times as much as the Labour Government did. The Chancellor is spending a very high proportion of the intake from VAT on helping those pensioners and others particularly affected by the cost of the scheme. The hon. Member for Glasgow, Garscadden (Mr. Dewar), the Opposition Front-Bench spokesman on social security, said recently that the Government should add to pensions to take account of VAT on fuel and that the Labour party
could do it with an extra 50p on pensions.
That is precisely what we have done, and the hon. Member for Islington, South and Finsbury (Mr. Smith) should have the courtesy to thank us for it.

Local Government Reorganisation

Mr. David Nicholson: To ask the Secretary of State for the Environment if he will make a statement on the process of local government reorganisation in England.

The Minister for Local Government and Planning (Mr. David Curry): The process for reviews of local government structure in England is set out in the revised guidance to the commission which was published on 22 November.

Mr. Nicholson: I hope that none of the threatened reorganisations will impede local authorities in pursuing the opportunities for energy conservation, as indicated in the Secretary of State's earlier reply. Apart from the abolition of Avon, which I think we all welcome, is my hon. Friend aware that my constituents in Somerset have a low level of interest in, and commitment to, revolution in administration in local government, apart from certain contrived write-ins? Will he therefore be cautious in pursuing that matter and listen carefully to the views that hon. Members in the areas affected make to him in due course?

Mr. Curry: I will certainly listen to the views of hon. Members. The fact that people have a low interest in something does not mean that it is not important to them. Local government spends £40 billion or £60 billion of taxpayers' money a year, whichever way one defines it, and is the form of government most in contact with people where delivery of service is concerned. It matters to people that they get local government which is effective, can be identified and is organised as rationally as possible. We seek to achieve that by the changes.

Mr. Milburn: Is the Minister aware of the anger in Darlington at his decision to overturn the Local Government Commission's recommendation for a unitary tier authority in the town? Does he realise that his decision rides roughshod over the overwhelming public consensus in Darlington, which backs the commission? Why did he not exempt Darlington from any further review, particularly as the commission's recommendation is in line with his new ministerial policy guidelines? Will he agree at least to meet an all-party delegation from Darlington to hear the concerns of local residents and to act on them?

Mr. Curry: If the recommendation is in line with the new guidance, I have no doubt that when the commission puts forward its revised proposal, it is likely to come up with something suitable for Darlington. That would be a sensible solution. I will meet anybody to discuss the matter, so long as people recognise that the commission's job is to make proposals, which we must then judge. I will not sit down and draw lines on a map, because that is not my job.

Mr. Dover: Does my hon. Friend accept that in Lancashire we see no need to start carving up existing boroughs and districts? Is it not in order for two or three to group together to share services?

Mr. Curry: We have made it clear that we do not think that existing districts will become unitary councils on their


own boundaries unless there are circumstances that make that common sense. We are looking for building blocks that will create effective and convenient local government, and district councils are clearly one of those building blocks. I have been speaking to district and county councils, and one of my arguments is that they should get to work locally and spend a littlé energy on making schemes that they think will work and be effective and that can be the starting point of the commission's deliberations. That is a sensible point from which to start.

Mr. Skinner: Does the Minister accept that there is something fishy going on with this local government review? He has set up this commission, apparently to give independent advice. In Derbyshire, it makes proposals; some Tory Members of Parliament do not like them, so they are changed. Most of the population want the status quo. Banham makes further proposals and now Ministers, including the Secretary of State, are telling him to have a third go. They keep changing the goalposts in Derbyshire just because they cannot get the right political result. The Minister wants those commissioners to act as Tory political apparatchiks. They should resign and show up the Minister, because he will not.

Mr. Curry: Although I am an optimist, the idea that the unitary authority created in Derbyshire from the three Labour authorities would be likely to fall imminently to the Conservatives is more than optimistic. Any idea that this is political gerrymandering is rubbish. We sent back the proposals because we had received many 'representations, which Sir John Banham had reported to us. Because the guidance had changed, the authorities wished to have their future considered in the light of the same guidance as will be used with every other authority. We have done that. If the commission wishes to come back and make a similar recommendation, it is at liberty to do so.

Mr. Cash: Will my hon. Friend accept that many people in Staffordshire are deeply worried about the way in which the Local Government Commission has been operating in the light of the Derbyshire decision? I congratulate him on referring the matter back, for sound reasons. Because the Under-Secretary who replied to Question 2 did not answer the point about car boot sales in relation to the division of functions within local authorities, will my hon. Friend accept that there is deep disquiet about car boot sales, for health and safety reasons and because there are worries about criminal activities?

Mr. Curry: I note what my hon. Friend says. As my hon. Friend the Under-Secretary said in his answer, the Government are examining whether it makes sense to remove what most people regard as an archaic rule. The point of having a consultation is to hear what people say, and we are conscious that there is widespread concern about car boot sales. We are looking hard to see what protection local authorities have and what initiatives they can take. If we conclude that that is not adequate, we shall have to change it or look carefully at proposals. I can give my hon. Friend that assurance.

Mr. Rendel: Is the Minister happy with the current arrangements for public consultation, given that those arrangements seem to vary from place to place?

Mr. Curry: The commission's job is to produce proposals that will achieve effective and convenient local

government. How the commission chooses to judge public opinion is something for it to decide, as is the internal management of the process.
The hon. Gentleman will be wise enough to know that often the answer to a question is the question one puts to begin with. In some circumstances, people fell back on a two-tier system because they did not like the first option they were given. We have asked local authorities and other people in the communities to get together to provide sensible schemes. By doing so, we want to create the circumstances in which there is a good starting point for the commission to come up with a scheme that reflects local opinion and delivers effective local government. All hon. Members have an interest in that.

Mr. Cormack: Will my hon. Friend give a cast-iron guarantee that no district council will be forced into a merger against its will and against the will of the people? Will he also confirm that there is no absolute minimum size for a unitary authority?

Mr. Curry: The Government have never said that there is a minimum or a maximum size for the new shape of local government. Flexibility must be retained by looking at local circumstances. Therefore, it would be perfectly silly to issue an arbitrary guideline which might not be sensible in the light of the particular conditions which prevail.

Mr. Straw: Is it not the truth that what could and should have been a judicious and impartial review of local government is being undermined by a series of inconsistent proposals from Sir John Banham and by incompetence and meddling by Ministers? Does not the Minister understand that having not one, not two but three reviews in Derbyshire and Durham has wasted the time and the money of local communities? Does he accept that that has also—quite unreasonably—destablised the staffs who were affected?
The review was only necessary to put right the effects of the 1972 reorganisation, for which the Secretary of State personally voted and which the Labour party correctly opposed. Will the Minister now confirm that the full cost of the review will be borne by the Exchequer and that local communities will not be forced to pay twice over for Conservative party mistakes and for the mess?

Mr. Curry: The hon. Gentleman has characteristically got hold of the wrong end of the stick. There have not been three reviews. The preliminary guidance clearly stated that the commission was to come up with preliminary conclusions, and later it was to come up with final conclusions; the Government then had the responsibility to accept the proposals, modify them or refer them back to commission. We have done nothing that was not spelled out clearly in the rules at the beginning of the procedure.
We have asked the commission to consider the matter again, partly because Sir John Banham suggested it and partly because people in the communities who saw that the guidelines had changed had said that there should be coherence across the whole review. We are seeking to achieve that.

Mrs. Gillan: Is my hon. Friend aware that my local county council of Buckinghamshire is anxious about the abbreviation of one week in the review period which has been made? The county council and the local district councils are working towards an agreed solution, which is preferable in all cases, and they are anxious that the time


has been taken out arbitrarily. Even at this late stage, will my hon. Friend examine the timetable and perhaps bring some influence to bear on it to reinstate the four-week period?

Mr. Curry: We accelerated the programme because everyone asked us to do so. People wished to have the uncertainty concluded.
I know that Buckinghamshire is a sensible part of world. If local people set about the task with a will, and if they are able to come up with the basics for a scheme, the commission will take a great deal of notice. The Government did what people wanted, but I have no doubt that sensible representations from Buckinghamshire to the commission would meet with an understanding reply.

Local Government Grant Allocation

Mr. Cohen: To ask the Secretary of State for the Environment what assessment he has made as to the proportion of local authorities which will (a) raise council tax rates and (b) introduce cuts in local government services following the grant allocation for 1994–95.

Mr. Curry: My right hon. Friend the Secretary of State intends to announce his detailed proposals for the local government finance settlement very shortly.

Mr. Cohen: Were not huge public, spending cuts announced in the Budget? Does that mean that there will be big council cuts and big council tax rises during the next three years? Has not the Secretary of State failed to defend his Department and shown himself to be the wimp of the Cabinet, and should not he go?

Mr. Curry: One thing which is always endearing about the hon. Gentleman is his predictability. Council taxes and services depend on the decisions taken by local councils. That depends on their reserves, collection of deficit, tax base and collection rate. What we are hearing now, before anybody knows the facts, is the old Labour litany that this will be a catastrophe. I recall that we heard that about Birmingham last year, yet no catastrophe overtook it, except that it, apparently, spent a lot of money building pyramids.

Mr. Ian Bruce: Will my hon. Friend reflect on the announcement that local authority capping will be kept on this year? As, clearly, many electors up and down the country have been foolish in voting in Liberal Democrat and Labour councils, does my hon. Friend agree that they should get what they voted for and take the blame for having increased the council tax, rather than pass the blame back to the Government for being prudent, unlike those councils?

Mr. Curry: The Government have experience of no controls on local government expendituré and we saw some outrageous increases. Because of that and because of a need to curb public expenditure generally-local government expenditure is a large proportion of the total pool—we think it sensible and prudent to maintain those controls on councils. That does not mean that there is not reasonable discretion for local authorities to determine their priorities. Certainly, there is enough discretion for people to make their choice at the ballot box.

Ministerial Visits

Mr. Benton: To ask the Secretary of State for the Environment how many cities he has visited since his appointment.

Mr. Gummer: I have visited 45 towns and cities since my appointment, including Manchester, York, Coventry, Birmingham, Leicester, Cambridge, Liverpool, Portsmouth, Nottingham, Derby, Gloucester, Bristol, Rochester and Peterborough.

Mr. Benton: I note that the Secretary of State made no reference to Sefton on Merseyside. Is he aware that in my local authority, Sefton metropolitan borough council, the housing waiting list is now more than 8,000 and that in my constituency of Bootle applicants have to wait for about three years before they are first considered for housing? The hon. Members for Southport (Mr. Banks) and for Crosby (Sir M. Thornton) will testify that it takes about seven years in other parts of Sefton before housing applicants are considered for housing.
Will the Secretary of State please admit to the House that this problem does not just pertain to my part of the world and that we face a national housing crisis? Will he recognise the difficulty? Will he tell the House what he proposes to do about it, particularly in the light of yesterday's statement from the Chancellor of the Exchequer, in which he announced further cuts in public spending?

Mr. Gummer: Two of my hon. Friends have visited Sefton. Sefton has one city challenge scheme, which is a good example of local partnership, and I notice that that gives a particular advantage to Bootle. Therefore, a great deal is being done in the hon. Gentleman's part of the world. It remains true to say that we will more than meet our election pledges on building social housing. What is more important perhaps is that we have already announced new means of ensuring opportunities for people who want to move out of local authority housing that has become too large for them in order to leave the space for others who need it. I hope that that scheme will benefit the hon. Gentleman's part of the world. A considerable sum is still going into housing. I am happy to look personally at the particular points that the hon. Gentleman raises about Sefton.

Mr. John Marshall: My right hon. Friend was not able to include the London borough of Barnet among those towns and cities that he has visited. Does he accept that he would be welcome to come to Barnet, especially if the standard spending assessment that he announces takes full account of the facts that we educate many children from refugee families and that we have a large elderly population?

Mr. Gummer: As I have been to a large number of London boroughs and often visit Barnet privately, I am happy to accept my hon. Friend's comment. It is true to say that most Conservative-controlled boroughs in London educate many people from neighbouring Labour boroughs—including the children of some Labour Members who prefer their children not to be educated by a Labour council.

Mr. Vaz: It is a great pity that the Secretary of State's visits to our cities and urban areas have not given him a proper and clear insight into the problems that they face.


Why does he not have the courage to admit that the Government simply do not have a clear, coherent or credible policy for dealing with our cities and urban areas? Why has he failed to defend his Department's budget against the Treasury cuts for local government which were announced yesterday? By how much more is he increasing resources in real terms to our cities as a result of the city pride project? Is that initiative like everything else that he does on the subject—a cheap political gimmick and another municipal gameshow that insults the integrity and intelligence of those who seek to administer local government?

Mr. Gummer: The hon. Gentleman is a little out of date. He spent a lot of time, when we were discussing the setting up of the single unified budget for the great cities of England, telling us that there would not be the money for it. I am pleased to remind him that the £1·4 billion which I announced last year would be available is available this year. That is what we promised that we would deliver and what we have done. The hon. Gentleman first complains that I did not defend the budget; then when I do defend it, he repeats that I did not. He must get the figures right.
The Government have done more than any previous Government for inner cities in Britain. We should be proud of what is happening in our cities. We are improving them through a series of mechanisms, which the Labour party fought tooth and nail. City challenge has been a great success and we shall continue to fight to improve our cities.
Since taking on the job, I have made the cities a priority and shown that we need to revitalise our cities all over the country. We should do that by dealing with the planning system properly and ensuring that the life of our cities enables people not only to live there but to work, take their leisure and shop there.

Urban Policy

Mr. O'Hara: To ask the Secretary of State for the Environment if he will make a statement on current Government urban policy.

Dr. Berry: To ask the Secretary of State for the Environment if he will make a statement on current Government urban policy.

Sir George Young: The Government will continue to support urban regeneration through a range of initiatives, including the single regeneration budget announced by my right hon. Friend on 4 November.

Mr. O'Hara: The Minister will be aware that Sefton may have been awarded city challenge resources, but Knowsley, which neighbours Sefton and has similar problems that are no less severe, was denied the resources, despite an excellent presentation. Will he recognise that the consolation prize of £1 million-worth of urban partnership funding can be seen locally only as a sop when it is accompanied by a rapid rundown in urban programme funding? The authority used to receive that funding at a level of £4·5 million per annum and used it to address strategically a wide range of economic, social and environmental problems. Will the Minister give a commitment to restore urban funding in my borough of Knowsley to such a level and in such a manner that it will be able once again to address its many problems coherently and will not be forced reluctantly to indulge in an annual game of urban funding bingo?

Sir George Young: As the hon. Member knows, the urban programme is being phased out, but alternative opportunities are available to his constituency—for example, we are spending £10 million through estate action to remodel the Lickers Lane estate in Whiston. We are giving help to three local shopping parades—Liverpool road, Leathers lane and Hillside road. The hon. Gentleman's authority has received £20 million in urban programme resources over the past 10 years. Although it may not have been successful with city challenge, there has been a substantial investment in that part of the country by my Department in particular schemes, which I am sure has been of benefit to his constituents.

Dr. Berry: What plans does the Minister have for places like Bristol, where existing Government schemes are coming to an end? It has lost area task force money, it is losing the safer cities project money and it does not have the benefit of assisted area status. How will the proposed Minister for Bristol fit into the plans? Would not a better alternative be to fund properly a democratically elected local council?

Sir George Young: The hon. Gentleman mentions all the things that Bristol does not have, but forgets to mention Bristol development corporation, which has just spent £47 million building a spine road linking the M32 to the A4. It is building a new shopping centre and a new business centre, and is helping to regenerate the whole area around Temple Meads station. For the hon. Gentleman to criticise the failure to win a number of smaller prizes when the area has the real help of that development corporation is to look through the telescope the wrong way.

Mr. Bates: Can my right hon. Friend confirm that this year the county of Cleveland will benefit from £100 million from the Government for urban regeneration? Central to that will be the continued excellent work of Teesside development corporation, which has attracted 7,500 jobs since it was established. Does he agree that that success and investment would make Teesside an ideal location for the new headquarters for the Urban Regeneration Agency?

Sir George Young: My hon. Friend's note of optimism strikes a much more recognisable tone on behalf of his constituents than do some of the Opposition complaints. It is certainly true that the development corporations in the north-east are transforming prospects and providing a much broader base for the economy and more jobs. I am grateful to my hon. Friend for the part that he plays in further pursuing the work of the development corporation in his constituency.

Homelessness

Mr. Nigel Griffiths: To ask the Secretary of State for the Environment what further steps he is taking to combat homelessness.

Sir George Young: The figures announced yesterday will mean that more families can move into home ownership, releasing their present local authority or housing association home to homeless families and others in housing need. Some £30 million is being made available to local authorities to run cash incentive schemes; and more Housing Corporation resources will be provided for its successful tenants' incentive scheme. That is good news


for families in housing need, who will benefit from new lettings made available. It is good news for tenants and good news for the housing market.
The Housing Corporation estimates that, with the plans announced yesterday, we will comfortably exceed our target of 153,000 homes funded through the Housing Corporation over the first three years of this Parliament. We now estimate that about 53,000 homes will be completed next year, making a total of 173,000 over the three-year period.

Mr. Griffiths: Will the Minister join me in congratulating the Edinburgh churches and other organisations that are arranging a sleep-out for homeless people on Friday in which I will participate? Does he recognise that the vast majority of people who have homes and incomes are appalled by the plight of homeless people and by the fact that the Government have presided over such an alarming increase in the number of homeless people and done so little to help them? What concrete measures does he propose to ensure that young single homeless are properly accommodated?

Sir George Young: It is not the case that homelessness is increasing in England. For the past four quarters, acceptances by local authorities of those who are statutorily homeless has fallen. I hope that the hon. Gentleman welcomes that. Fewer and fewer of those accepted as homeless are in bed-and-breakfast accommodation. There has been a fall of 41 per cent. over the past 12 months in the number of families in bed and breakfast.
In terms of the single homeless, a substantial number of rough sleepers have been assisted by the Government's rough sleepers initiative in London, and the number sleeping rough on the streets has fallen from about 1,060 three years ago to about 360. I am determined to make further progress and to see that number fall yet further.

Mr. Hendry: I congratulate my right hon. Friend on those policies, which are bringing down homeless statistics for the first time since records began. Can he confirm that there are 800,000 empty properties, representing 13 empty homes for every family in temporary accommodation? The Government are right to target resources on bringing those homes back into use, and is not that exactly what my right hon. Friend is doing?

Sir George Young: My hon. Friend is right to draw attention to the fact that there are 800,000 empty properties. He is also right to promote schemes to bring those properties back into action, such as, for example, the housing association as managing agent scheme. Everybody who wants to bring decent homes within the reach of more people should do all that he can to encourage such schemes to get off the ground so that those homes can generate income for their owners and provide decent shelter for those who might otherwise be in unsatisfactory accommodation.

Mr. Battle: Do not the Minister's replies demonstrate a shameful complacency? Everyone except the Government seems to agree that 300,000 new homes are needed in the next three years. Is the Minister aware that today, more than 200 homes will be repossessed, more than 500 families will be registered as officially homeless, more than 60,000 families are trapped in temporary accommodation and more than 8,000 will sleep out, not only in London but in towns and cities throughout the country?
Why, then, is the Minister backing a Budget that is hammering down on housing investment, cutting £500 million from housing associations and local councils and effectively, at a stroke, cutting out 10,000 new homes? Would it not be economic common sense to go for housing investment, to use the backlog of local councils' capital receipts to generate jobs in construction and manufacturing and to provide homes to rent that are desperately needed—or will the Minister now tell us that his Government have decided that in our society we shall be scarred by homelessness well into the next century?

Sir George Young: What really matters for those in housing need is not the number of new homes that housing associations built each year but the number of new lettings that housing associations provide. The Government are refocusing the resources of the housing associations into more cost-effective schemes, such as the tenants incentives scheme, shared ownership and do-it-yourself shared ownership. The number of completions next year, at 53,000, is roughly double the number of completions that were achieved in 1991-92. It is not the case that the Housing Corporation will not make a real impact. The Housing Corporation believes that, during the next three year, it will maintain the output that it envisaged completing at the beginning of the year.

Mr. Fabricant: Is my right hon. Friend aware that although Conservative Members welcome the reduction in the number of the homeless, Shelter claims that there are more than 2 million homeless people in England?

Sir George Young: A number of figures are bandied around in the housing world. The figure of 2 million homeless people which was produced by Shelter is one of the most absurd figures that I have seen in three years as Housing Minister. Shelter has included in the 2 million figure everyone who is on an assured shorthold. The assured shorthold is now the most common form of letting in the private rented sector. If one were to describe as homeless everyone who had an assured shorthold, one would include many hon. Members.

Air Quality Testing Stations

Dr. Howells: To ask the Secretary of State for the Environment when the Government intend to increase the number of air quality testing stations and by how many.

Mr. Gummer: My Department published consultation proposals on the development of air quality monitoring on 2 November. Decisions will be reached in the light of responses to that consultation.

Dr. Howells: Can the Secretary of State say why so few testing stations are currently operating and why, given the huge increase in asthma and the links between asthma and vehicle emissions, he does not have immediate plans to build new testing stations to have them operating wherever concentrations of population and traffic coincide?

Mr. Gummer: We have 42 continuous automatic stations. We are spending £4 million a year on that work. Anyone in the country can telephone his or her local number to find out the quality of the air in the place to which he or she wishes to go. That is especially valuable to those who have asthma problems. I have great sympathy with people who have such problems, as I am a former


sufferer. I am, therefore, pleased that we shall have a report by the sub-group investigating that topic. I hope to have that report in 1994 and to consider it in conjunction with the work that we have already done. I thank the hon. Gentleman for raising an important matter, which I shall not forget.

Mr. Spring: My right hon. Friend will be aware that much air pollution comes from the motor car. What plans has my right hon. Friend in place to reduce pollution from that source?

Mr. Gummer: The reduction in pollution that has already occurred because of the move to leadless petrol is a remarkable achievement. That has been extremely helpful and has made a major difference. It is one of the biggest changes that has occurred. Cars now have to have catalytic converters. We are seeking to tighten those arrangements and have been doing so for some time.
The matter is also under review in the European Community. My hon. Friend will know that I visited the motor show to look at the latest developments and I very much hope that we can press motor producers to do more. With that in mind, I spoke to the Society of Motor Manufacturers and Traders and I am pleased to say that I have had considerable support from that organisation to do what we all want to do—reduce the effect of pollution in towns.

Mr. Chris Smith: Far from being reduced, did not pollution from nitrogen dioxide in central London rise by 17 per cent. last year alone and is not the number of national monitoring stations for nitrogen dioxide in Britain seven compared with 200 in Germany? Given that one in every seven children suffers from asthma and that the number of sufferers has doubled in the past 10 years, is not the least we can do—and the first step we should take—to improve substantially the monitoring of nitrogen dioxide and air pollution so that we can take action to tackle the problem seriously?

Mr. Gummer: The hon. Gentleman's figures are wrong. Three times as many centres do that already. There are 21 stations monitoring nitrogen dioxide; the hon. Gentleman said that there were seven. The figures we put forward are the facts; the ones he put forward are his hopes. The hon. Gentleman is constantly trying to undermine what the Government are doing. What we are doing is very effective. I have said that I am not sure whether we are doing the job well enough. That is why I issued a consultation paper. I shall consider that consultation paper and act on the facts. If the hon. Gentleman were more willing to acquaint himself with the facts and seek our help on them, we would get much further.

Social Security Uprating

The Secretary of State for Social Security (Mr. Peter Lilley): With permission, I would like to make a statement on social security following from my right hon. and learned Friend's Budget statement.
Spending on social security this year will amount to more than £80 billion. It will increase over the next three years to £83 billion, £88 billion and £92 billion. It is the largest increase of any Department and shows our commitment to the needy, the elderly, sick and disabled people.
Despite the intense pressures on public spending, we will keep our commitment to uprate benefits, keep our pledges to families and the elderly and keep our promise to give extra help with fuel bills.
Although inflation over the past 12 months was low, the cost of uprating all benefits to offset it would have been around £2 billion next year. I am grateful to my right hon. and learned Friend the Chancellor for going beyond that, and providing substantial extra funds to help people with fuel bills.
Next year, that extra help will be worth nearly £400 million, and by the time the full rate of VAT has fed through, the total extra help will run at £1·25 billion a year. Over three years, the total additional help for VAT on fuel amounts to £2·5 billion pounds. That will be a permanent increase in the value of benefits to 15 million people.
My right hon. and learned Friend the Chancellor explained that I plan to give everyone on income support except pensioners and disabled people extra help next April before the higher heating bills arrive, so their benefits will be uprated by 3·9 per cent., which is higher than most people in work will receive. A further 2 million people above the income support level, who get housing benefits or familiar credit, will receive a similar increase.
I was also determined to help those who have worked, saved and earned modest pensions, and who normally get no extra help. So, from next April, on top of uprating for inflation, all pensions will be increased by 50p a week for single pensioners and 70p for couples. The following year, extra help for VAT on fuel will be £1 a week for single pensioners and £1·40 for couples. From the third year onwards, that extra help will be as much as £1·40 for a single pensioner and £2 for a couple. All those on widow's benefit, invalidity benefit, severe disablement allowance and disability premium will get the same extra help.
In addition, I will increase cold weather payments by 25 per cent. over two years. To help those with high heating bills, the scheme to help insulate homes and improve fuel efficiency will be virtually doubled in value and extended to all pensioners and disabled people.
Yesterday, the Chancellor announced a new national savings pensioners guaranteed income bond which will provide regular monthly payments at a fixed rate of interest.
By any stretch of the imagination, this is a substantial package. It far exceeds what most people expected, and fulfils our promise to help those most affected.
We are determined to maintain proper support for all those whom the welfare state exists to help, but given the relentless growth of spending, we have to make sure that the money is spent to best effect. That is the aim of my long-term review.
My first priority is to make savings which do not affect benefit entitlements. That is why operational costs have been kept within last year's cash limit, despite the extra work load, and why I am intensifying the battle against fraud. I have created a new fraud board to step up prevention, deterrence and detection of fraud. It will be chaired by my noble Friend the Parliamentary Under-Secretary of State for Social Security.
I am cracking down on order book fraud. The order book has been redesigned to prevent forgery. We have introduced secure delivery methods to prevent theft, and we are rewarding vigilant Post Office employees who stop false encashment of stolen order books. I am continuing to look at new ways of tackling fraud.
I am also stopping a number of abuses. I shall discourage local authorities paying housing benefit for unnecessarily expensive property. I shall stop councils paying housing benefits to people who entered this country on the express understanding that they would be no burden on public funds. I am also bringing in regulations today to prevent employers from avoiding national insurance by paying their employees in commodities like gold bullion. Those measures should save £500 million over 3 years.
We also need to make sure that benefits concentrate help on those whom Parliament wishes to help. I have been examining the social security system sector by sector. I am now able to introduce a fundamental reform of sickness benefits. The number of people on statutory sick pay, sickness benefit and invalidity benefit has almost doubled since 1979, from just over I million to almost 2 million, even though the nation has been getting healthier.
Britain has the second highest level of sick leave of any EC country. The level varies between companies even in the same business. Those differences reflect management's success or failure in motivating employees, caring for their health and monitoring absences. At present, the Government reimburse each firm 80 per cent. of the cost of its statutory sick pay. That largely removes the incentive to reduce sick leave.
From April next year, I propose to abolish reimbursement, except to small employers. Small employers usually have less sick leave but are harder hit by prolonged illness. Therefore, I intend to increase the help to small employers and extend it to more of them.
So far, we have been helping employers whose national insurance bill was £16,000 or less a year. I am raising that limit to £20,000. So far, we have been reimbursing 100 per cent. of statutory sick pay for absences of longer than six weeks. I shall start giving 100 per cent. help after four weeks. That will help an extra 50,000 employers, at a cost of £25 million. The new arrangements will help two thirds of all employers.
At the same time, I am cutting employers' national insurance rates by substantially more than they were spending on statutory sick pay. Indeed, the cut in national insurance will also offset the future extra cost of statutory maternity pay, which employers were expecting to bear without compensation. So employers as a whole will be no worse off. Indeed, their net costs will be reduced by over £100 million a year, and those who respond to the incentive to improve staff health will benefit even more.
There has been a particularly marked increase in the number of people claiming invalidity benefit in recent years. The number on this benefit has more than doubled


in the past 10 years and trebled in the past 15 years. That growth is particularly surprising, given improving health and better health care.
I therefore propose to introduce, from April 1995, a more objective medical test of whether people can work. I am issuing a consultation paper today, copies of which are available in the Vote Office, and I am forming a panel of medical experts and representatives of disabled people. They will be asked to help define what constitutes incapacity to work and how it should be measured.
The new test will apply to new applicants. Those drawing invalidity benefit are already subject to regular review. Under the present test, about 100,000 people each year are found to be fit for work and have their benefit withdrawn.
After April 1995, those on the highest "care" rate of DLA, those with terminal illnesses, those on a list of specified severe or chronic conditions and those currently on invalidity benefit who are by then 58 or over will no longer be subject to any review. But the new test will be used in reviews of other existing claimants. No one who is genuinely unable to work for medical reasons has cause for concern.
I am also simplifying the structure of all sickness benefits for new claimants from April 1995. At present, there are two rates of statutory sick pay. I propose to abolish the lower rate, which means that lower-paid workers will receive the higher rate of benefit, worth an extra £3·70 a week.
I shall also replace sickness and invalidity benefit by a new incapacity benefit that will be payable at three rates—the longer the period of sickness, the higher the rate. The lowest rate will apply during the first 28 weeks; the middle rate for the rest of the first year; and the highest rate after a year.
Those who are incapacitated early in life will receive extra help because they will have had less time to make additional personal provision for ill health. Additional payments will be made to those whose spouses are caring for children or are over 60.
New claimants will no longer be entitled to a state earnings related addition. Incapacity benefit will cease at pension age. Those already drawing invalidity benefit when the new incapacity benefit is introduced will continue to draw their benefit at existing rates and will not be taxed on it. Only those who come on to incapacity benefit from April 1995 will be liable to tax.
I am making a number of valuable changes for sick or disabled people. First, people on incapacity benefit will be free to do up to 16 hours voluntary work without losing their benefit. That will be widely welcomed by potential volunteers, voluntary organisations and those they help.
Secondly, from April 1995, people taking jobs with the help of disability working allowance will automatically qualify for free prescriptions and free dental charges. Thirdly, I am increasing the level of support to Motability, whose help for disabled people is so extensive that it now runs the biggest car fleet in the country. I am making a £1 million increase in the grant to the mobility equipment fund, which adapts vehicles for use by severely disabled people.
Overall, those reforms of sickness benefits will curb their rapidly growing cost; provide a more rational structure of benefits; encourage employers to improve the

motivation and health of employees; and concentrate benefit on those genuinely unable to work. I believe that they will command widespread support.
The incapacity benefits are for people who cannot work. I now turn to benefits for people who are capable of work. Clearly, the best answer, wherever possible, is to help people to find jobs, but sometimes the rules lose sight of that aim. We currently have two benefits for the unemployed—unemployment benefit and income support—and they overlap. Some people are entitled to both, many switch between the two, and the benefit levels leapfrog because they are uprated by different indices. This year, single adults on unemployment benefit will get 65p more than on income support; next year, they will get 25p less.
The two benefits cover different periods. Unemployment benefit excludes Sunday; income support includes Sunday. They have different rules, which require different bureaucracies, offices and computer systems. That results in confusion for unemployed people, complexity for staff and expense for taxpayers. It is time for reform.
I propose to replace the two benefits with a new job seeker's allowance, starting in 1996, which will be more clearly focused on helping people into work. The longer people spend on benefit, the more their motivation and skills decline, and the less chance they have of finding a job.
All unemployed people will be required to enter into a job seeker's agreement at the start of their claim, which will commit them to a plan of action to seek work. We will have a single set of measures for those who fail to take thee necessary steps to seek work, but we will give extra help to those who make the effort to find a job.
The new job seeker's allowance will have a single set of rates. We will provide help for unemployed people and their dependants according to their needs, and this will be paid for as long as they need it. People who have paid national insurance contributions will receive a personal rate for six months, irrespective of their capital or their partners' earnings.
Unemployed people currently cannot get income support if their partners are working for 16 hours or more. That problem emerged as a by-product of improvements in family credit last year. We will retain the current beneficial rules for family credit, but we will restore the limit for partners of unemployed people to 24 hours.
Going back to work can involve extra costs—for example, for clothing and transport. We will be testing a job finder's grant of up to £200 to help people who have not had a job for two years meet those costs. We said in our manifesto that we would do this, and I am pleased that we are now implementing that pledge.
I will also give very significant help to people with family responsibilities who want to return to work. Many people find it unattractive to leave benefit for a low-paid job, especially if they need to pay for child care. I propose to allow families with a child under 11 to offset up to £40 per week of child care costs against their earnings when claiming family credit and related benefits. It will be worth' up to £28 a week; it will start next October; and it will be available to couples where both are working or one is incapacitated, and to lone parents. It will cover the cost of registered child minders or nurseries.
The change will give a powerful new incentive for parents to move into work. It will provide help for up to


150,000 families, including 50,000 whom we expect to take up work as a direct result of the change. The measure has been widely welcomed.
I am today publishing a White Paper on the equalisation of state pension age at 65. Copies are available in the Vote Office. The difference in state pension age for men and women is the last glaring inequality in our benefit system, and we are committed to phasing it out. It is essential to do so in order to provide a clear framework within which occupational pension schemes can comply with the European Court ruling that requires them to equalise their benefits for men and women.
It is right to equalise at age 65, for three reasons. First, women are increasingly playing a role equal to that of men in the economy. Women live longer, and increasingly expect to be able to work as long as men.
Secondly, people are living longer, healthier lives. As a result, by the year 2030 the number of pensioners will have increased by 50 per cent., and there will be fewer people of working age to support them. At present, there are 3·3 people of working age for each pensioner. That ratio was set to decline to 2·2 to 1 by 2030, but equalising at 65 will improve the future support ratio to a more sustainable 2·7 to 1.
Thirdly, throughout the world countries are equalising upwards or increasing pension age for both sexes. The majority of European Community countries have, or are planning, a state pension age of 65 or higher, and the United States is moving up to a pension age of 67. We cannot afford to reduce our competitiveness by lowering our pension age. Equalising at 65 will eventually reduce the pensions bill by £5 billion: it is the key to ensuring that the state retirement pension remains affordable.
Our proposals contain a number of features that will make this decision widely acceptable. We have given women and employers plenty of time to plan for the future: equalisation will be phased in between 2010 and 2020.

Mr. Eddie Loyden: rose—

Madam Speaker: Order. It is not the custom for a Secretary of State to give way while making a statement.

Mr. Lilley: So women now aged 44 and over will not be affected; only those now aged 38 or under will have a state pension age of 65. Furthermore, the pension entitlements of millions of people—mostly women—will be very significantly enhanced.
We plan to extend home responsibilities protection to the state earnings-related pension scheme. That will enable women—and men—who take time out of the labour market to care for children or disabled people to build full SERPS entitlement in as few as 20 working years. That will be a very substantial benefit, enhancing the value of women's pensions by around £2 billion by the year 2020.
In addition, to help those on low earnings, family credit and disability working allowance will count as earnings in the calculation of pensions. Finally, we are extending the period of flexibility during which people can choose to start drawing their pensions. At present, they can defer drawing retirement pensions for up to five years, and for each year of deferral their pensions will increase by 7·5 per cent. In future, the increase will be 10 per cent., and people will be able to defer for as many years as they like.
The best support for an improved social security system is a vibrant free enterprise economy. That is what creates the wealth to pay for benefits, generates jobs and provides opportunities for people to support themselves. To nurture economic growth, we must curb borrowing and ensure that the social security system does not outstrip or undermine the nation's ability to pay for it.
All the reforms that I have announced are intended to strengthen our welfare state, to adapt it to modern needs and to make it affordable into the next century. I have been able to announce a generous package of help for those most affected by the imposition of VAT on fuel; reforms to concentrate help on those who are genuinely unable to work; incentives for employers to improve the health and motivation of their staff; a more rational structure of help for those seeking work; help for working mothers to cope with child care costs; an equal state pension age; and help for women and the low-paid to build up better pensions in the future. I commend these measures to the House.

Mr. Donald Dewar: My constituents will of course be grateful for the knowledge that it will be harder to avoid national insurance contributions by taking payment in the form of bullion. I must add, however, that that is not the test that they are likely to apply to either the Budget or the uprating statement.
This Budget endangers what even the most optimistic and bullish commentators have been describing as a fragile recovery. The 1993 Budget represents the biggest tax hike in history, taking £24 billion out of the economy in higher taxes in just over three years. It is, as I am sure Secretary of State recognises, a pay more, get less, Budget in which 95 per cent. of households will lose and yet see cuts in the services and benefits for which they have paid.
It is astonishing that the Minister who styles himself a low-tax advocate is partly responsible for a tax debacle. Half a million people on low incomes have been trawled into the income tax net as a result of the double freeze in personal allowances.
National insurance contributions are rising by 1 per cent.—a tax that will raise £300 million more than a penny on income tax, precisely because it bites at a lower level of income and hits half a million people who are too poor to pay income tax. In return, national insurance benefits are being cut.
There is little to cheer low-income households in the uprating statement. The Minister has done the essential minimum by uprating in line with indexation, but even here, there are hidden barbs of misery for those who look at the fine print.
Why, in the context of the general uprating, has the Minister chosen to cut the value of the severe disabililty premium paid with income support? How can the Chancellor have claimed to give extra help to the disabled on income support to compensate for VAT on fuel—a tax that we know from research hits the severely disabled more than other group?
When the right hon. Member for St. Albans (Mr. Lilley) has clawed back all that help and more with a cut of 58p' to the benefit of a single disabled adult and of £1·16 to the benefit of a severely disabled couple, does he not recognise that the country will see that as mean and unnecessary? Does not the Minister recognise that, despite his remarkable complacency, the VAT compensation scheme is a con?

Mr. David Shaw: What a ridiculous statement.

Mr. Dewar: I shall explain that to the hon. Member for Dover. Simply, the Chancellor's 50p will not meet the extra fuel costs when the VAT bills roll in. The Clarke gap means financial pain for many. Pensioners are already saying, "I'm frightened to put on the fire." That fear will grow as the harsh arithmetic emerges. For poorer families on income support, the 0·4 per cent. uprating is a miserable prospect. Has the Minister seen the research from York university published this month that tested the 0·4 per cent. figure and found that 97 per cent. of a sample of 5,000 households on benefit lost financially?
If Conservative Members are happy with what is to happen will the Secretary of State defend the fact that a married couple on income support with two children under 11 will be struggling to make ends meet from April on £113·05 a week because they will have the princely sum of 45p to deal with VAT costs? Go and ask constituents in that situation whether 45p a week is a generous settlement that will cover additional outlays that they will face.
How does the Secretary of State defend the situation in which a single disabled person over 25, who will receive £65·15 income support a week from April, will get only the Chancellor's 50p? Can he confirm that many thousands of disabled people will get no compensation at all, such as those who are in receipt of the disability living allowance and the disability working allowance? If that is so, how does the Minister explain it?
VAT will cost the average household £l a week or more in 1994–95 and £1·30 a week if there are children in the family. Government figures make that clear. In the weeks ahead, the message that Back Benchers will get from pensioners in the country is that 50p is not enough—and they will be right. Ministers cannot buy off the old and cold for 50p.
The disabled seem to be remarkably singled out as Budget losers. I understand that the Secretary of State is obsessed with the growth in invalidity benefits. Does he remember that his own Department argued with great vim and pertinacity with the Public Accounts Select Committee that the principal reasons for the increase in invalidity benefit were demographic factors and the rise in unemployment to which it was directly linked? Perhaps the
Secretary of State should re-read that evidence. He should also recognise that, if he tries to tell the House that invalidity benefit has been a soft touch, he must explain why, last year, 53 per cent. of appeals to independent tribunals against the refusal of invalidity benefit succeeded.
Does the Secretary of State recall his Department's estimates that between 10 and 20 per cent. of invalidity claimants would lose entitlement to benefit as a result of the introduction of the so-called objective test? Does he remember that the estimate was that between 30,000 and 60,000 claimants would be affected? That was a working document, but can he tell me whether that will be largely the effect of the test, as he is now introducing it? If not, how many people who would have qualified if they had applied under the old system will not qualify under the new system? We are entitled to know that.
The Secretary of State will remember the example of the 55-year-old builder with angina, who was unable to walk on the flat for more than 200 yards because of constant pain? He would be deprived of invalidity benefit. Is that the type of person who will find that he does not qualify for the new benefit?
I accept that we shall have to study the documents, but the Secretary of State will recognise that we shall want to examine closely the new test that he is introducing. I understand that it takes the form of a points league table—a form in which the Government seem obsessively interested.
In one section, we shall be invited to consider whether someone is unable to handle a book in order to read it. If he cannot, he will get 25 points. If he cannot lift and push an unladen wheelbarrow, he will get only 4·5 points. If he cannot pick up and carry a 5 lb bag of potatoes in either hand separately, he will get 9·5 points.
We shall want to examine the test. I hope that the Secretary of State accepts that objectivity sounds all very well, but that, if it translates into a lack of sympathy, there will be absolutely no public support for what I believe is ultimately a cost-cutting exercise.
How will the changes in invalidity benefit fit in with the proposed changes to statutory sick pay? The larger employers will no longer be reimbursed for sick pay costs. Does not the Secretary of State accept that that will create a disincentive to employ people who may have a bad health record? Therefore, people will lose entitlement to the new incapacity benefit and at the same time discover that another barrier has been placed in their way as they search in a difficult job market. The Government assume in the Red Book that unemployment will remain at about 2·75 million over the next three or four years.
It seems to me that a Government who are determined not to introduce anti-discrimination legislation to protect disabled people are going in for a little discrimination themselves. Did the Secretary of State see—just to reinforce the point—the Budget taster on the front page of the Daily Mail today, which carried the simple message:
Sick pay: Can you afford to be ill?
That may turn out to be remarkably prescient.
The taxing of invalidity benefit is certainly not the place the Opposition would have started in looking for additional revue. Am I right in thinking that, of two people living in the same street, in the same physical state and in the same social and financial circumstances, one could be in receipt of invalidity benefit and the other could be in receipt of the broadly comparable but presumably reduced incapacity benefit? One would be taxed and the other would not. That would create a great deal of bitterness and misunderstanding. It would reduce taxation policy to something of a lottery, based on the point at which one falls ill. I hope that the Secretary of State will give some thought to that.
I turn now to the proposed job seeker's allowance. We have been told that there will be a single benefit for the unemployed. We have been told by the Chancellor, in one of his rather broad brushstrokes, that he will cut through the bureaucratic maze. I am not sure whether he was referring to the efforts of his right hon. Friend the Secretary of State for Social Security over the past few years or to his colleague in the Department of Employment, but we shall want to know in some detail whether it will mean an integration of services between the Department of. Employment and the Department of Social Security and, if so, exactly how it will work, and what the job implications will be.
Our suspicion—I think that many people share it—is that, while the ringing cry is, "It's time for reform," when that comes from the Secretary of State, it can be roughly


translated into, "It's time for a cut." The people who will suffer are those who are at risk and who are looking for work.
I ask the Secretary of State to comment specifically on the impact on, and implications for, the contributory principle. He will remember that there have been many fine ministerial defences of that principle over recent months. What we have here is a situation in which people who have built up their entitlement through contributions over many years see it halved at a stroke. They will have not unemployment benefit for 12 months, but a job seeker's allowance for six months.
That seems to me to be a significant shift in Government policy, and it rather underlines what we know from documents that we have seen about a reconsideration of the Government's approach to the contributory principle. That is a serious and important point, and I hope that the Secretary of State will deal with it.
My worry is that, on the one hand, in some Bonnie and Clyde situation—I shall leave it to the two Ministers to decide who is who—people will have to pay 1 per cent. more in national insurance contributions. That is £300 million more for the Chancellor than a penny on income tax. At the same time, the unemployed and the people looking for work are being kicked as they leave by that remarkable reduction in their rights.
The new job seeker's allowance appears in a fine new livery. It has been beautifully repackaged, but at the end of the day it means paying more for less. It is a bad day for those of us who believe in fundamental and civilised provision on a co-operative basis.
How many will be removed from entitlement to benefit as a result of the cut from 12 months to six months? The figure is bound to be substantial, and has been put at 200,000. Will the Secretary of State confirm that? If I am wrong, how many will there be?
As it will be of interest to the House, will he tell us what the effect would be on the current unemployment figures if his proposed scheme were operating now? I believe, as do many, that one reason why it is so attractive to the right hon. Gentleman is that he can evict people not only from benefit, but from the unemployment totals.
I must conclude soon, so I shall deal with the massaging of figures, but in particular the assertion by the Chancellor that raising the retirement age for women to 65 will make a
considerable difference to the affordability of the modern welfare state in the next century."—[Official Report, 30 November 1993; Vol. 233, c. 927.]
We shall all want to analyse that sentence in the period ahead. Perhaps the Secretary of State could draw his colleague's attention to figure 7 of his Department's discussion document "Options for Equality in State Pension Aid". It sets out the impact of the national insurance fund and national insurance contribution rates of equalising the state pension age in 2025, when the Government's proposals will be fully in force.
With a pension age of 60, the combined rate of employer/employee contributions necessary to keep the fund in balance would fall from 23·4 per cent. now to just 19·2 per cent. According to the table supplied by the Department, with a common age of 65, the combined national insurance contribution will fall to 15·7 per cent. There is an important debate about the best way forward,

but it should not be taken on scare stories and inaccurate information, which are designed to stampede people in one direction.
The reason for those dramatic figures is that the Government have been cutting the basic pension as a percentage of average earnings steadily over a long period. It will soon no longer be the "cornerstone of the welfare state", as the Chancellor rather imaginatively described it the other day. It is important that we recognise that we must look at providing choice for people in retirement as in every other part of their careers.
The Government talk about choice, but all too often fail to deliver. Under the proposal, everyone will have to wait until they are 65. It is particularly worrying for women, who will have to wait an extra five years. If the Secretary of State feels that that is the last glaring example of inequality for women in the social security system, I am prepared to supply him with something of which he is quite fond—"a little list" for him to examine.
The tragedy is that there is so little evidence, even in that proposal, that he is earmarking any of the savings to help women to find their way in a system in which, because of their careers as mothers and their employment patterns, they are often severely prejudiced.
We must get away from a set retirement age, which sits ill with the modern labour market and the needs of the future. As the Secretary of State knows, the Labour party is committed to a flexible decade of retirement. The guiding principles should be choice, adequate provision and security. Those contemplating retirement should be able to decide what is right for them according to their circumstances. We shall conduct the debate on that basis.
It was a bad Budget. I do not want to be ungracious, because there were some good things in it. For example, I welcome the proposals for a child care provision for those on family credit. It is a limited concession, worth a maximum of £28 to a small client group of about 200,000 families. It is particularly welcome because it is in sharp contrast to the arid and unpleasant scapegoat politics that we have seen when we have discussed lone parents in recent months and in which, I am afraid, the Secretary of State has taken a rather disreputable role.
The final point I welcome is the fraud board. I want to mention that because I am often accused of forgetting about fraud. I do not do so. I believe that it should be struck at on all occasions. I welcome the fraud board because it is obviously needed. Will the Secretary of State say whether that move is a response to the Public Accounts Committee report of the other day, which pointed out that there was not even a decent computer system for the fraud section and that fraud was often not detected early enough?
The uprating statement is a stage in the drive towards a vision of the welfare state that nobody on this side of the House shares. It is not a case of the Secretary of State being a victim of the Chancellor. I fear that he is obtusely marching in the wrong direction. He wants to shrink the welfare state. He wants to withdraw the Government from some sectors of provision. It goes with the contracting-out move and the obsession with privatisation. That policy, unchecked, will see the basic pension fall to under 10 per cent. of the average wage. We do not share that vision, and we shall continue to fight it.

Mr. Lilley: I apologise for the fact that my statement took nearly as long as the questions from the hon. Member from Glasgow, Garscadden (Mr. Dewar).


The hon. Gentleman began by ridiculing the closing of loopholes in the tax system. I agree that it would be foolish to base an entire economic policy on that, and I trust that he will have a word with the hon. Member for Dunfermline, East (Mr. Brown) about it.
The hon. Gentleman went on to attack parts of the Budget for which I am not responsible, and my right hon. and learned Friend the Chancellor is well able to look after himself. The hon. Gentleman attacked the national insurance contributions bill that is to flow from the Budget earlier this year. He then got on to a part of the Budget that I am unable to identify in any of the upratings. If he will write to me about the premium that he thinks we have cut, I shall respond to him, but I am not aware that that is the case.
At long last, the hon. Gentleman got on to the compensation for VAT on fuel bills and said that it was a con, and inadequate. I remind him of what he said in The People on 21 November:
The Government has to add something on to take account of that"—
the increased impact of VAT on fuel—
and they could do it with an extra 50p on pensions.
We have done rather better than that. In the first year, the figure will be 70p for a pensioner couple, rising to £1·40 in the second year and £2 for the poorest pensioners in the third year. I am, of course, always sensitive to suggestions that I am spendthrift.
The hon. Gentleman then said that the Government were not giving enough help to those who are on income support. Their benefits will be increased by 3·9 per cent., which is more than most people at work are getting. The child care measure will help many people get back into work who were previously dependent on benefit.
The hon. Gentleman asked for clarification on the severe disablement allowance. That is being increased by 50p in the same way as pensions, to ensure that disabled people who are reliant on benefit will get the same help. It is nonsense to say that the disabled are losers from the Budget—far from it. It is particularly absurd to say that the reforms of invalidity benefit, and its replacement by an incapacity benefit which has a proper objective test, will harm anyone who is disabled. The test is designed to concentrate help on those who are genuinely unable to work, and to make sure that the people who are excluded from benefit are those who are able to work.
The hon. Member for Garscadden asked how many people were likely to fail the incapacity benefit test. That will depend on the precise terms of the test, and those will emerge from consultation and evaluation. It is likely in broad measure that around 70,000 people a year who would have received benefit will no longer do so.
He said that we should look closely at the test, and suggested that it was somehow to be ridiculed. I will remind him that the basis on which we are working to build a test is precisely the basis of the survey of disability by the Office of Population Censuses and Surveys. That survey has become the sacred text of those in the disability world. It is widely respected, and we are building upon it.
The hon. Gentleman described the decision not to reimburse statutory sick pay while compensating employers by reducing national insurance contributions by more than an equal amount as a disincentive to employ disabled people. I will remind him that disabled people have generally a better attendance record and lower levels of sickness and absence from work than do other people.
The Government look on the measure as an incentive to employers to improve the health of their employees, and they will realise that it is in their interests. Good employers already do it, and more will do so and take an interest in that aspect of the well-being of their employees. The hon. Gentleman has not told us what the Labour party's thinking in that area is. Does he believe that the present system should be pickled in formaldehyde, and that nothing in the welfare system should ever be changed, regardless of whether there are obvious abuses and issues which need to be addressed?
The hon. Gentleman then came on to the job seeker's allowance and asked whether we envisaged an integrated delivery. That, of course, must be the objective. My Department, together with the Employment Service, is investigating how that can be best achieved in the long term. That is in the interests of the beneficiaries, as much as in the interests of efficient delivery.
He talked about the Government undermining the contributory principle by the changes which are proposed in the job seeker's allowance. I will again remind him that the Commission for Social Justice, which was established by the Labour party, has issued a document which puts the whole contributory principle in doubt. It suggests that it should be determined whether the principle should continue at all. It is rich for him to suggest that changes to particular benefits threatens that principle.

Mr. Bob Cryer: That is not Labour party policy.

Mr. Lilley: The Labour party has not got a policy—that is the problem. The party has put it out to commission.
The hon. Member for Garscadden asked how many were likely to be removed from benefit as a result of the measure. The figure is likely to be half that which he talks about. Two thirds of all unemployed people get back to work within six months. We hope that the associated changes which we are making will improve that proportion, as will the recovery of the economy.
The hon. Gentleman turned to the state pension age, and implied that somehow we could afford to equalise at a lower age, and that that would not cost much. Equalisation at 60 would cost £12 billion a year more than it would cost at 65.
If he believes that the optimum use of £12 billion is to pay out unconditionally a pension to people between 60 and 65 whether or not they are working and whatever their means, he must have a strange set of priorities, especially when he knows that the one group that will not benefit are those with the lowest means who are already on income support, which is set at a higher level than the statutory pension.
I am glad that the hon. Gentleman welcomed, albeit grudgingly, the changes that we are making to child care incentives for those on family credit. They have been widely suppprted across the board and across the political spectrum. They will show their value when they come in before too long.
The hon. Gentleman ended with the ritual accusation that I believed in shrinking the welfare state. Nothing could be further from the truth. Those who are not prepared to reform cannot preserve the welfare state and ensure that it is affordable into the next century. Because we have the courage to take the necessary decisions, we are the true friends of welfare provision in the country.

Several hon. Members: rose—

Madam Speaker: Order. Those initial exchanges have taken 50 minutes. Often, when a Secretary of State makes a statement, the House seems to believe that it can move into debate mode. Statements are not the beginning of a debate; they are made so that the Secretary of State can be questioned on what he has said. I caution the House now that I am not prepared to hear statements from hon. Members on either side of the House. I am here to listen to pertinent questions to the Secretary of State's statement. I want brisk questions and brisk answers.

Mrs. Marion Roe: I congratulate my right hon. Friend on his statement, which clearly honours the Government's manifesto pledges. In particular, I welcome the Government's decision to equalise—

Madam Speaker: Order. The hon. Lady is the first offender. Let me hear her question, please.

Mrs. Roe: I note that home responsibilities protection is to be extended to SERPS. What measures are the Government taking to help women to build up a good pension entitlement, which, of course, has been denied to them in the past because of family commitments?

Mr. Lilley: I am grateful to my hon. Friend. By extending home responsibilities protection to SERPS—it already exists for the basic pension—we will enable women who work as few as 20 years to get full entitlement to SERPS. This will be as if they had worked the same number of years as others without domestic responsibilities do to get full entitlement. That is of great value.
We will also take account of family credit and disability working allowance in assessing people's entitlement to pensions, treating both as earnings. That will help in particular those on low incomes, predominantly women, to build up their entitlement into the next century. That is worth about £100 million extra to women's pensions next century.

Mr. Don Foster: Will the Secretary of State acknowledge that the Liberal Democrats welcome the proposals for child care allowance? Will he recognise that his compensation package for VAT on fuel is £300 million short of the figure recommended by the Social Security Advisory Committee, and that, by compensating those on benefit but not those on low pay, he is creating yet another poverty trap? Will he acknowledge that many disabled people will have additional fuel costs? Will he tell the House his estimate of the number of such people and what proportion of them will not be assisted by his support mechanism for VAT on fuel?

Mr. Lilley: I would have been happier, had the hon. Gentleman come clean on Liberal Democratic party policy on imposing taxes on energy—

Madam Speaker: Is that a statement or an answer?

Mr. Lilley: It is a riposte. I am not sure where that comes.
I am glad that the hon. Gentleman welcomes our position on child care. It is absurd of him to suggest that the VAT package is inadequate. It vastly exceeds what most people expected and asked for.

Mr. John Townend: Is my right hon. Friend aware that in my constituency we have an enormous

number of old people and that the proposals to compensate them for VAT on fuel will be welcomed? The proposal that compensation will not be restricted to those on income support will be particularly welcomed. In general, old-age pensioners will benefit from the proposal. Does he not agree that it is churlish of the Opposition to criticise the proposal, when the cost will be no less than £1·2 billion a year? That is a generous settlement, and it will be welcome throughout the country.

Mr. Lilley: I am grateful to my hon. Friend. I am sure that he is right about the wide welcome that the proposals will receive. It was important that help should extend beyond those on income-related benefits to include pensioners, those on invalidity benefit, widows and those on severe disablement allowance. I am glad that that has such wide support.

Mr. Frank Field: How many people would be taken off the dole queues if the new benefit were introduced today without one extra person finding a job? Given that we have a Treasury team that boasts about being so tough with the estimates put before it, is it right to assume that the Secretary of State has estimated the cost of the new scheme in 1996? If so, will he tell us what the unemployment level will be in the year that the new scheme is introduced?

Mr. Lilley: On the hon. Gentleman's last question, I am afraid that I have to rely on the fact that we work with a stylised assumption of the level of unemployment over the survey period—I think that it is 2·75 million people. That is the standard way in which it is done. Working on the assumption that unemployment will be roughly the same then as now, savings in the first year of the new job seeker's allowance, which will not start until 1996, will be about £100 million, and twice that in a full year.

Mr. Peter Thurnham: I congratulate my right hon. Friend on a major package of measures. Will he confirm that total payments to the long-term sick and disabled have trebled under the Government and that the new disability working allowances will benefit even more peolpe as a result of the changes that he has announced?

Mr. Lilley: My hon. Friend is right. The caseload of invalidity benefit has trebled. No Government could ignore that or fail to consider whether it was justifiable. We concluded that it was right to introduce an objective medical test. I believe that that will have the support of the medical profession.
Most doctors find it invidious that they have a responsibility to the state to act as the gateway to that benefit, while also having a duty to and natural sympathy for their patients. The new policy wil remove them from that difficulty. Disability working allowance will be enhanced by allowing people on that benefit to have free prescription and dental treatment. Those people will welcome the proposal, which will remove any hesitation that they may have about taking up a job with the benefit of the allowance.

Ms Glenda Jackson: Will the job seeker's agreement be entered into freely or will failure to sign the piece of paper mean that the unemployed applicant will be denied even the first six months of


benefit? Will the £28 child care allowance be paid while parents are seeking work or only when they have obtained work?

Mr. Lilley: Obviously, the child care allowance is for those on family credit, and it influences the amount of family credit to which they are entitled. Therefore, it will be paid when people return to work or take up a job—that is the intention. The idea that we should pay child care allowance to people who are out of work would go further than anyone could reasonably suppose.
The job seeker's agreement is intended to be in the interest of job seekers and to help them systematically to get back into work. Therefore, of course it will be a requirement of the benefit that job seekers take part in that process. I hope that they would do so and would be encouraged to do so by the hon. Lady.

Mr. David Willetts: I welcome my right hon. Friend's benefit reforms—invalidity benefit, benefits for unemployed people and the pension age. I particularly welcome the fact that he has addressed one of the most absurd features of the current—

Madam Speaker: Order. I took on the hon. Member for Broxbourne (Mrs. Roe) when she started making statements. I am asking for questions from the hon. Gentleman.

Mr. Willetts: I have a question about one of the most unsatisfactory features of the current regime for unemployed people. If one partner loses a job, the other, who may be in work, promptly has to give up work to obtain any entitlement to benefit. Will the Secretary of State explain how the new improvement in the rules on income support will help people in those circumstances?

Mr. Lilley: That problem has emerged largely as a result of the reduction in the hours rule, from 24 hours to 16. We propose to restore the rule to 24 hours so that people will be able to work up to 24 hours without their partners losing income support. Therefore, there will be no incentive for them to give up working, which was sometimes the case. That will be a sensible change when we introduce the job seeker's allowance.

Mrs. Audrey Wise: How much good-quality child care does the Secretary of State think can be bought for £28 a week?

Mr. Lilley: The average for those paying for child care is less than that. The average for those who use registered child minders and nurseries is roughly £40 a week. That is the amount that we are allowing people to offset against their earnings. Because of the taper, they will effectively benefit to the tune of £28.
We are saying that, effectively, the working mother—it is usually the mother—will benefit from the taxpayer to the tune of £28, and will contribute up to £12. The level we have set recognises that many people do not work the full 40-odd hours a week. However, that is what they choose to do and to spend. The amount is in line with that and is reasonable. That is why it has been so widely accepted by everybody in the field, apart from the hon. Lady.

Mr. Roger Knapman: I congratulate my right hon. Friend on his characteristically excellent statement.

Will he confirm that, once again, he has shown that the control of inflation is particularly beneficial to those on lower incomes?

Mr. Lilley: My hon. Friend is absolutely right. People do not realise that high inflation erodes benefits every month between upratings. Now that we have low inflation, benefits are holding their purchasing power between upratings, and that is good for claimants. None the less, it is still expensive to uprate, even with inflation as modest as it has been over the past 12 months. It will cost us more than £2 billion to do so next year, before the extra help that my right hon. and learned Friend the Chancellor is giving to uprate additionally to cope with VAT on fuel.

Mr. Andrew Welsh: What is the difference between the compensation that is offered and the increased cost of VAT on fuel? Does the right hon. Gentleman accept that there will be an inevitable fall in fuel consumption which will hit the poorest hardest, with an estimated 9 per cent. fall among the poorest in our community, compared with only a 1 per cent. fall among the richest? How can he justify the unfairness of that?

Mr. Lilley: As I have said, we have made a generous contribution towards the cost of VAT on fuel for the least well-off, for pensioners and others. In addition, we are offering help to those with higher fuel bills by nearly doubling the home energy efficiency scheme, which helps with insulation and fuel efficiency and will help people to reduce fuel costs without reducing the temperature in which they live. That is desirable, and it is now extended to pensioners and the disabled, irrespective of whether they are on income-related benefits. They will welcome that, and it helps to square the circle to which the hon. Gentleman referred.

Mr. Alan Howarth: Will my right hon. Friend accept that there will be a widespread welcome for the measures that he is introducing to encourage employers to have a greater concern for the health of their employees and to reduce absenteeism? Does he agree that the main reason for the growth in the number of claimants for invalidity benefit has been the difficulty that people have had in getting off the benefit by returning to work?
What are my right hon. Friend's thoughts, therefore, on how employers can be encouraged to recruit and retain chronically sick and disabled employees? Will the Government, for example, reconsider the requirement that employers should pay 50 per cent. of the cost of special aids for disabled people, and will my right hon. Friend look constructively and sympathetically at the case for anti-discrimination legislation?

Mr. Lilley: Of course, we do not envisage the test forcing people who are genuinely chronically sick and disabled to give up invalidity benefit, or the new incapacity benefit to which they will remain entitled if they are medically unable to work. We envisage that those who are able to work and are receiving a benefit which is not the appropriate one would be guided and helped back into work by the new job seeker's allowance and other such arrangements.
We certainly want—there is a proposal but not yet a compulsion—employers to bear some of the costs of employing disabled people, but we are enhancing and making more attractive the disability working allowance, the principal help that we give people whose earning


capacity is impaired by their disability but who want to work and who find jobs. I hope that that will be increasingly used by people in those circumstances to get back into work.

Mrs. Jane Kennedy: Who will administer the job seeker's allowance? Will it be the Benefits Agency or the Employment Service or some other agency that has not yet been created? Will young people aged less than 25 receive the same amount of job seeker's allowance as those aged over 25? Currently, the arrangements are that people on income support aged less than 25 receive less money than other people.
May I advise the Secretary of State that the 1991 census return demonstrated that 40 per cent. of the unemployed people in Liverpool had never worked? There is a huge number of young people who are genuinely seeking work and for whom there is none.

Mr. Lilley: In response to the first question, about who will administer the job seeker's allowance, a joint study is taking place involving the Benefits Agency and the Employment Service—our two Departments—to consider how best we can integrate the delivery of the job seeker's allowance. I envisage that they will report to me some time in the spring.
As to the value of benefits, we envisage their being rationalised on the basis of the income support levels. I appreciate the hon. Lady's concerns about people in certain regions of the country who, often for several generations, have had no employment. My right hon. Friend the Secretary of State for Employment is keen to tackle that problem, and has brought forward specific measures that will help long-term unemployed people back into work.
Ultimately, as I said, the health of the economy is vital to provide job opportunities as well as the measures that we can take through the social security system, and I believe that we are better placed to make progress on that front than any other country in Europe.

Mr. James Clappison: I congratulate my right hon. Friend on his package, and especially on the scope and extent of compensation for VAT on fuel. Can he clarify the position of a pensioner couple, where there are two entitlements to pension in the household?

Mr. Lilley: We are proposing that, in the first year, a single pensioner will get a 50p increment over and above the basic uprating to cope with VAT on fuel. When that pensioner has a dependent spouse, he or she will get 70p. When both pensioners in the same household have pension entitlement in their own right, they will get two 50ps—they will be £1 better off in the first year. There will be an increase, likewise, in subsequent years.

Mr. Cryer: Can the Secretary of State confirm that his concern about invalidity benefit is not borne out by the medical examination on which invalidity benefit depends? Can he tell us, for example, whether any doctors have been reproved, dismissed or disciplined in any way because of mistakes made in the past when they were making decisions about invalidity benefit? If that is not the case, and no one has been disciplined, why is he so anxious to change invalidity benefit and put people in jeopardy?
Does that confirm that the Secretary of State has abandoned his unscrupulous and unprincipled attack on

single mothers as the sole cause of the economic ills of the Government, and that the real cost of social security is so high because of the economic failures of the Government, which have produced unparallelled levels of unemployment, which he has admitted will continue for year after year after year? Is it not true that it is a failure of capitalism?

Mr. Lilley: There we have it. The hon. Member will recall that, earlier this year, the medical journal Monitor Weekly conducted a survey of doctors, about two thirds of whom said that they had given people chits to get them on to invalidity benefit even though they knew that they were capable of work.
I, however, have never criticised doctors in that context. I have made it clear to the House that I believe that, if we create a situation which puts doctors in an invidious position; where the rules are unclear; where it is not entirely clear, as a result of the original drafting and the subsequent interpretation by the courts of the laws, quite what assessment should be made and what factors have to be taken into account in deciding whether someone is medically unable to work; it is the duty of the House and the Government to propose measures to change and improve that.
That is what we shall do by introducing an objective medical test. The proof of the pudding will be in the eating. I believe that we will produce a sensible test. It will show that some people who have been getting the benefit should not have done, and it will also ensure those who should get the benefit get it in future.

Mr. Bernard Jenkin: Does my right hon. Friend agree that it would have been impossible to provide such a generous measure of support for those who will be affected by VAT on fuel had we not also looked at measures to limit the growth of social security into the future? Do not those measures go hand in hand, and would it not be impossible to continue to care for those who need the help unless we take the tough decisions that we need to take?

Mr. Lilley: Well, yes and no. Essentially, the revenue to finance the extra VAT package comes from VAT itself. It is self-contained, and my right hon. and learned Friend the Chancellor and his predecessor considered that necessary both to raise revenue and to meet our commitments to reduce emissions under the Rio agreements. However, we certainly have to make changes in the growth of benefits to make sure that the system does not outstrip the nation's ability to pay or undermine the working of the economy on which the social security system ultimately depends.

Mr. Clifford Forsythe: While I do not wish to take away from the welcome parts of the Minister's statement, is he aware that all the insulation in the world will not be effective unless heat is already in the house? Is he happy that he has got the balance right between the amount of money that has been allowed to overcome the VAT on fuel and the insulation part of the statement?

Mr. Lilley: I believe that we have the balance right. My right hon. and learned Friend the Chancellor and my right hon. Friend the Secretary of State for the Environment have agreed to a near doubling of the money. An extra £35 million will be spent on financing additional work on insulation and fuel efficiency. That will enable us to extend


it widely. It was a sensible contribution to the overall package, while the benefits system provides uniform help for all pensioners, long-term sick and other groups.

Mr. Charles Hendry: Does my right hon. Friend agree that people should be encouraged to take out insurance policies to provide themselves with a better standard of living in the event of unemployment or to help with their mortgage payments during such a period? What reaction has he had from charities to his welcome announcement that people on incapacity benefit will be allowed to work for 16 hours a week for a voluntary organisation?
Finally, has he seen in the booklet produced by the benefits agency that people who apply for incapacity benefit score 23·5 points for being frequently muddled and confused? Therefore, should not the hon. Member for Glasgow, Garscadden (Mr. Dewar) be eligible for the benefit?

Mr. Lilley: I cannot say precisely how the hon. Gentleman would perform under the new tests, but we could ask him to participate in the evaluation exercise. What was the first question? [Interruption.] I will participate in the evaluation exercise as well.
As far as insurance is concerned, we certainly encourage people to make provision for retirement over and above the state pension scheme. Of course, people frequently take out provision which will top up their ability to maintain their standard of living if they have any long-term sickness. That would be on top of the basic provision that incapacity benefit would provide.
There is less case for such insurance to deal with the short-term difficulties that my hon. Friend mentioned. However, when I introduced the limit on the mortgage income support help we give, I mentioned that there was a case for people looking to whether they should take out insurance of their mortgages against unemployment to make sure that they had help while they were finding their way back into work. Obviously, I hope people will do that.

Dr. Norman A. Godman.: If the Minister has such a genuine concern for those who legitimately claim invalidity benefit, why does he continue to refuse to accept the judgment of Commissioner Skinner in April 1992? [Interruption.] The Minister may smile, but it is an important issue.
Commissioner Skinner made a judgment in 1992 that women aged 60 to 65 should be allowed to claim invalidity benefit. He said that the Government's position infringed the European directive on equality of treatment. Why does the Minister continue to refuse to implement that sound judgment? Why has he sought a further postponement of his appeal against that judgment before the Master of the Rolls? Why this obduracy?

Mr. Lilley: We normally take decisions on whether to contest rulings of the courts and tribunals on the basis of legal advice rather than an attempt to change policy. Policy is better altered in this place, rather than by the courts reinterpreting things which originally meant something else. Obviously, we look at the results of court cases to see whether the cumulative effect would require a change in the law. It is on the basis of legal advice that particular decisions to contest are taken.

Mr. David Shaw: Can my right hon. Friend confirm that, on the basis of the plans he has announced today,

social security expenditure in Britain will probably reach £100 billion a year by the end of the decade? Does that not show a substantial commitment by the Government to meeting the needs of those in genuine need? Would it be possible to meet the needs of pensioners, the disabled and others who need help and assistance without clamping down on fraud and abuse which the Government are tackling well?

Mr. Lilley: My hon. Friend is right to say that the bill for social security is still rising, despite our commitment to ensure that the money is well spent and concentrated on those in need. At present, the £80 billion bill that we have to meet means that, on average, every working person has to contribute £13 every working day just to finance social security. Obviously, it is right that we should rein in that growth before it becomes unbearable for people to pay.
In particular, we have to make sure that fraud and abuse of the system is ruled out, because no one wants to waste a penny in that way. That is why I attach such importance to bearing down on fraud, and why I have introduced reforms in the management and organisation of the fraud effort in my Department to make sure that it is as effective as possible.

Mr. Ronnie Campbell: Is it not true that 200,000 or more working people at the lower end of the wage scale will be brought into paying at least £1 a week in tax because of the freezing of the personal allowance? Is it not also true that the Budget has been one of the biggest hikes in taxation that Britain has ever seen?

Mr. Lilley: I am not going to take any lectures on taxation from a party that is wedded to increasing taxes and expenditure and whose every proposal and question today has implicitly meant that taxes would be higher to finance higher expenditure. Where would it get the money?

Mr. Iain Duncan Smith: Does my right hon. Friend agree that the new single benefit, the job seeker's allowance, will help focus benefit on those most in need and make it easier for them to claim? Will he also confirm that, unlike in the Labour party, the concept of contributory benefits still exists?

Mr. Lilley: I agree with my hon. Friend that the job seeker's allowance will be more rational, better focused and accompanied by better help to get back to work, which is what the benefit should be about. As my hon. Friend rightly says, it contains a contributory element, and he is perfectly correct to say that the Commission for Social Justice, in which the Labour party privatised its policy formulation, has been considering the total abolition of the contributory principle, although it has not yet had the courage firmly to reach that conclusion.

Mr. Robert N. Wareing: Does the Secretary of State understand that disabled people are not looking for crumbs from the Tory table but are looking for a fair deal? Many of them do not wish to be a cost to the state—indeed, they would love to have the opportunity to work. Why does the Secretary of State not get together with the Secretary of State for Employment and introduce legislation to levy a charge on those employers who do not fulfil the quota under the 1944 Act? Incidentally, that would include his own Department.

Mr. Lilley: I entirely agree with the hon. Gentleman about the motivation and aspirations of most disabled


people. Of course, it is to help those who are in a position to get back to work that we established the disability working allowance. We are reviewing the present quota system to see whether it can be improved or whether changes need to be made. Obviously, until that review is complete, I cannot comment on the hon. Gentleman's suggestion.

Mr. Mark Robinson: Can my right hon. Friend confirm that, contrary to some stories being put about today, disabled people in receipt of benefit will get the benefits of the VAT compensation package?

Mr. Lilley: I can confirm that the more generous help that we are making available will be extended to everyone on invalidity benefit, those on severe disablement allowance, or on the disability premium in income support—which automatically feeds through into other income-related benefits. That covers virtually all disabled people.
I believe that an assessment has been made which refers to people who are not entitled to the benefits that we are talking about, or indeed to any disability benefits, because they have a lower level of disability and were the group identified in the survey of the Office of Population Censuses and Surveys, which extended to a lower level of disability than is covered by DLA.

Mr. Jeremy Corbyn: Can the Secretary of State confirm that it is the Government's policy to continue reducing the value of the state old-age pension as a proportion of average earnings? Can he explain why he now believes that it is necessary to raise the retirement age for women to 65, when any civilised society would look towards reducing it by equalising retirement age at 60 for both men and women?

Mr. Lilley: As for the final question, virtually every country in the world is considering, or has implemented—

Mr. Corbyn: That does not make it right.

Mr. Lilley: Of course it does not make it right. But it suggests that, as a test of civilisation, it would be unreasonable to rule out all other countries in the world from the civilised community. Other countries are doing it for sensible reasons. The number of pensioners is set to increase worldwide, and the size of the working population is set to diminish. Therefore, anyone is driven to the conclusion which we reached, that equalisation at 65 was the sensible route.

Mr. Michael Fabricant: Is my right hon. Friend aware that fuel prices have fallen by some 18 per cent. since 1983? Is he further aware that, in the midlands, prices have fallen by about 4 per cent. over the past 12 months? Does he agree that, taking this into account, the generous package that he has proposed will protect the majority of pensioners from the imposition of VAT on fuel?

Mr. Lilley: My hon. Friend is absolutely right. Over the past 10 years, there has been an 18 per cent. decline in average fuel prices, relative to the general price level. Recently, we have seen some absolute cuts in gas and other prices. Since privatisation, the trend in both gas and electricity prices is down in real terms. That is good news

for the longer term. As long as those competitive pressures continue to operate, they will feed through to the benefit of pensioners and others, and will mean that the money that we have provided will go even further.

Mr. Clive Betts: Does the Secretary of State accept that, whatever the arguments about the inadequacy of the compensation scheme for VAT on fuel, he has offered no compensation whatever to families in which the wage earner is in low-paid employment? Those families will have to pay the full cost of VAT on fuel.
Does the Secretary of State accept that those families will have to choose next winter among paying for fuel, paying for food and paying for clothing? Does he further accept that, by doing that, he has worsened the poverty trap? People seeking work may well find that they will be worse off financially if they get a job, and the proposed measures will have contributed to that.

Mr. Lilley: No. That is not the case because the impact will feed through to those on family credit and on housing benefit, and therefore they will get extra help. By definition, those who are not on benefit cannot be helped through the benefit system. The benefit system is there primarily to help those who are least able to cope. That is what we have done.
We have done much more than the Opposition spokesman on social security, the hon. Member for Garscadden, suggested we should do. He suggested that it would be sufficient to compensate for the increase in VAT. I am surprised that he gives such a grudging welcome for something which must have exceeded his expectations and those of other people.

Mr. Malcolm Wicks: Does the Secretary of State agree that, notwithstanding his statement that "we keep our pledges to families", the combined impact of the cut in married couple allowance and a few pennies only for child benefit means that the Budget will hit families with children much more than single people? In a year of growing concern about the family, is this not sadly an anti-family Budget?

Mr. Lilley: No. That is certainly not the case. Of course, the married couple allowance does not depend on whether there are children. My right hon. and learned Friend made the changes for the reasons that he gave in his Budget statement. The most significant change in the package of measures announced in the Budget, which was also in my statement today, was the child care disregard in family credit, which will be of great benefit to those with family responsibilities who have the prospect of work—possibly low-paid work—and who will be enabled to work and enabled to pay their child care costs. It will be a boost to the incomes of those who are already working and will encourage perhaps 50,000 people back into work. That is good news for them and for the economy.

Mr. Malcolm Chisholm: Can the Minister tell us what effect cheating the unemployed of six months' benefit will have on the unemployment figures? Is it the case that many people will not be able to claim income support and therefore, apart from depriving them of much-needed money, this will simply be the 31st fiddle of the unemployment figures?

Mr. Lilley: I do not envisage that it will have any measurable impact on the unemployment level, because most people will be entitled to the means-tested element of the job seeker's allowance, or they will register as unemployed to get the credits for their eventual retirement and therefore will appear in the figures either way.

Points of Order

Mr. Andrew Faulds: On a point of order, Madam Speaker. I should like to apologise to the House and to you in particular for my rudeness yesterday in using a somewhat inappropriate term when I raised the need for an apology from the Secretary of State for Education for his discourtesy to the House in breaching the Budget deadline, for which you reprimanded him. I regret my verbal misdemeanour—it does not happen very often. I trust that you will accept my extended apologies.

Madam Speaker: I am much obliged to the hon. Gentleman. Of course I accept his apology.

Mr. Mike Hall: On a point of order, Madam Speaker. Over the past few months, I have written to the Secretary of State for Social Security with inquiries about Government policy with regard to the operation of the Child Support Agency. I know that other hon. Members have done the same. Those inquiries have been passed to the Child Support Agency for answering, and the replies have been totally inadequate.
Last week, I tabled a question to the Secretary of State for Social Security asking him to list the number of inquiries the Child Support Agency has dealt with since its inception by constituency order. I received a reply yesterday, which states:
I understand from Ros Hepplewhite, the chief executive of the Child Support Agency, that information in the form requested is not available and could be obtained only at disproportionate cost."—[Official Report, 30 November 1993; Vol. 233, c. 429.]
Is it in order for Ministers to avoid answering questions in this way? What steps can you take to ensure that information requested by hon. Members is provided and that Ministers are accountable to the House on Government policy?

Madam Speaker: I am sure that the hon. Gentleman is aware that the content of answers is not a matter for the Chair. I simply tell him to seek opportunities to pursue his complaint with Ministers. Perhaps I could draw his attention to the fact that there will be an Adjournment debate on that issue tomorrow.

Dr. Norman A. Godman: On a point of order, Madam Speaker. It is with reference to your earlier strictures on a somewhat lengthy statement. First, may I compliment you? You called all hon. Members who sought to catch your eye. Nevertheless, I should like to know whether you are ever given any indication of the likely length of the presentation of a statement before the Minister goes to the Dispatch Box.

Madam Speaker: I am concerned not simply about the length of statements but also about the length of replies to statements and the time taken by Back Benchers to put their questions. The whole exchanges during Question Time and following statements concern me. Although I am very anxious to call all Members who stand—I cannot always do that, but I do my best—it is possible only if I have brisk questions and brisk responses from the Minister concerned.

BILLS PRESENTED

SOCIAL SECURITY (CONTRIBUTIONS)

Mr. Secretary Lilley, supported by Mr. Chancellor of the Exchequer, Mr. Secretary Hunt, Mr. Secretary Lang, Mrs. Secretary Bottomley, Mr. Secretary Redwood, Mr. Nicholas Scott and Mr. William Hague presented a Bill to increase primary Class 1 contributions payable under the Social Security Contributions and Benefits Act 1992; to correct the provisions as to the appropriate national health service allocation in the case of such contributions; to clarify what reliefs are to be taken into account in assessing Class 4 contributions; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. [Bill 2.]

STATUTORY SICK PAY

Mr. Secretary Lilley, supported by Mr. Chancellor of the Exchequer, Mr. Secretary Heseltine, Mr. Secretary Hunt, Mr. Secretary Lang, Secretary Sir Patrick Mayhew, Mr. Secretary Redwood, Mr. Nicholas Scott and Mr. William Hague presented a Bill to remove the right of employers other than small employers to recover sums paid by them by way of statutory sick pay; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. [Bill 3.]

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [30 November].

Orders of the Day — AMENDMENT OF THE LAW

Motion made, and Question proposed,

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting any supply, acquisition or importation;
(b) for refunding any amount of tax;
(c) for varying the rate of that tax otherwise than in relation to all supplies, acquisitions and importations; or
(d) for relief other than relief applying to goods of whatever description or services of whatever description.—[Mr. Kenneth Clarke.]

Question again proposed.

Orders of the Day — Budget Resolutions and Economic Situation

5 pm

Mr. Gordon Brown: Today we are discussing the imposition of tax rises from April next year, which now amount to the biggest tax demand in history.
Tax rises have been imposed not just through VAT and national insurance but three changes in income tax push people's income tax bills up. The Chancellor announced three new taxes: on home insurance; car insurance; and holidays.
Those tax rises are the result of promises that have been broken unfairly and without regret, shame or apology. Promises on taxes have now been broken side by side with promises on public spending. Tragically, those promises have been broken merely to pay for the mistakes of the past, in a Budget that has no clear strategy, direction or leadership for our future.
With private investment still falling this year, the Budget now leaves public investment falling next year. The Chancellor now accepts that growth has been lower than forecast and will be lower than forecast next year, as inflation starts to rise again. Despite all his boasts yesterday, the Budget does nothing about the central revelation, admitted by the Secretary of State for Trade only few days ago, that our productivity is 25 per cent. below that of our competitors. But contained in the statement was the Chancellor's admission that 3 per cent. growth in our economy was well above the sustainable growth rate that we can expect.
Let us look at exactly what the Chancellor has done. First, income tax rises will come in March, April and the following April. But let us recall for a minute the promise that the Prime Minister made during the election campaign. He said:
I have no doubt that we will be able to make further reductions in the rate of taxation. We will make further reductions in the rate of taxation but perhaps not at the rate of a penny per year but we will be able to make reductions year on year at a smaller rate.


Yet what do we have in the Budget? We have three separate increases in our income tax bills from April next year and from April 1995.
First, personal allowances have been frozen for two years at a cost of 34p. Secondly, married couples' allowance has been cut, at a cost of £1·85 this year and another £1·65 thereafter. Thirdly, mortgage tax relief will be cut in 1994 and again in 1995, representing a further £2·24 in the first year and nearly £5 by the end of the second rise, despite the promise in the Conservative manifesto that mortgage tax relief would be maintained.
In total, the income tax bill for a typical family will be £5 a week higher next year, with another £1·65 on top the year after. That is from a Prime Minister who said at a press conference: "All mine, all mine." In his election manifesto he said that lower taxes were necessary to encourage people and create a more productive economy. He said that lower taxes would transfer power from the state to the people and that high taxes kill the goose that lays the golden egg.
That is why the country will never trust the Conservatives on tax again. The Budget finally broke any residual trust that even the most ardent Tory could have in the Government over taxation policy.
Some 500,000 new taxpayers will be drawn into the income tax net, 300,000 of whom will be women. Some 95 per cent. of British households will lose money as a result of the Budget's cumulative effects. So Conservative Members must explain why they went to the country on election manifestos promising not just no tax rises but tax cuts, whereas the Budget Red Book says that taxes will rise next year from £220 billion, eventually reaching £271 billion in the next few years. I want them to explain their promises of tax cuts year on year, given that taxes will rise from 35 per cent. of national income to 37, 37·5, 38 and then 38·5 per cent.—the biggest share of national income, and higher than under any Labour Government.

Mr. John Townend: Will the hon. Gentleman give way?

Mr. Brown: I will give way to the hon. Gentleman but he has just come into the Chamber and I shall not give way to other hon. Members who have just done that.

Mr. Townend: I am obliged to the hon. Gentleman. I understand his opposition to tax increases. If the Labour party disapproves of the tax increases introduced by the Government, how would it deal with the budget deficit? Would the hon. Gentleman deal with it all on the spending side? Would that not mean savage cuts? Will he specify in which areas he would introduce cuts?

Mr. Brown: The hon. Gentleman forgets that his party went to the electorate and promised no tax rises. I recall an exchange between my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) and the hon. Gentleman in a previous debate, when the hon. Gentleman stood up and boldly said that he had not promised that there would be income tax cuts in his manifesto. So he did not even believe the Prime Minister's comments at the last election.
Let us be absolutely clear about what the Budget means for home owners. Mortgage tax relief will be cut as people pay more for their homes; VAT on fuel will be imposed so that people pay more to heat their homes; a new tax on

home insurance will mean that people pay more to protect their homes. None of those taxes were ever mentioned in the Conservative party manifesto.
For car owners, the Budget means more tax on licences, petrol and car insurance, and motorists will soon pay to travel along motorways as a result of the imposition of tolls.
Is it not amazing that even rising crime becomes a tax-raising opportunity for the Government? Home insurance premiums have risen by 500 per cent. because of the rising cost of crime under the Government and now they impose a tax on it as a revenue-raising opportunity. Because of crime, car insurance premiums have risen by 260 per cent. and taxes will put those up a further 3 per cent. as a result of the Chancellor's announcement.
Not only income tax will rise. As a result of the two Budgets this year, we are now being asked to pay more for less because of the rise in national insurance. Let us remember—it should be recorded in Hansard so that people can see it—that on 28 January 1992, before the election, the Prime Minister stated clearly:
I have no plans to raise…the level of national insurance contributions".
During the election campaign, when it became an issue, the then chairman of the Conservative party issued a statement saying that a rise in national insurance would be a "back door stealth tax". Who has implemented a back door stealth tax?
People are being asked to pay more national insurance, but they are to receive less. I can think of no bigger blow to the unemployed than that people in work must now pay more in national insurance contributions knowing that, if they lose their job in future years, the unemployment benefit available to them will be halved.

Mr. Patrick Nicholls: As the hon. Gentleman does not even approve of those modest tax increases, what public services would be cut if his party were in office? The public need that information to make sense of his attack.

Mr. Brown: The hon. Gentleman was almost inaudible because of the noise in the House. He went to the electorate and said that he would cut taxes and that taxes would not rise. We should have an apology from the hon. Gentleman.

Mr. Nicholls: On a point of order, Mr. Deputy Speaker. The hon. Gentleman said that he could not hear what I was saying because he was trying to find out from his leader what the answer was. He is now inviting me to apologise. Surely he should give way to see if I am willing to do so.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): That is not a point of order for the Chair. It is for the hon. Member for Dunfermline, East (Mr. Brown) to decide whether he will give way.

Mr. Brown: The hon. Gentleman, as I understand it, asked about what he called modest tax increases, which will mean £10 a week more for the typical family. We will again vote against the imposition of VAT on fuel. We will bring the matter to the House and give the hon. Gentleman a chance to support us. If he is to honour his promise to the electorate, he should vote with us.

Mr. Nicholls: rose—

Mr. Bernard Jenkin: rose—

Mr. Brown: No, I will not give way again.

Mr. Deputy Speaker: Order. I have heard the hon. Gentleman say very clearly that he is not giving way again. I am sure that hon. Members also heard him say that.

Mr. Brown: I will give way to the hon. Member for Colchester, North (Mr. Jenkin).

Mr. Jenkin: Do we understand that the opening section of the economic policy that will be expounded in the next Labour manifesto will start with the sentence "We will not start from here"?

Mr. Brown: The hon. Gentleman is absolutely right: we will not start from here. We warned the Government about the impact of recession and about failing to take action on unemployment. The hon. Gentleman should warn his Front-Bench colleagues that he made a promise when he stood at the general election for Colchester, North. He said:
There are 10 good reasons to vote Conservative.
And what was reason number four? "Low taxes". We can see what has happened to his promise.
Let us recall what was said about VAT:
We have no plans and no need to extend the scope of VAT.
What about the council tax? The Chief Secretary admitted on "Newsnight" last night that council tax bills were likely to rise as a result of yesterday's announcement. There will be rent rises as a result of the cuts in housing that were announced yesterday.
What about all the promises that the Conservatives made about taxes and charges during the election campaign? The Chancellor, in his own personal manifesto, said in Rushcliffe:
Only the Conservatives believe in keeping tax down to give incentives to enterprise and investment.
The Chief Secretary said in Enfield:
The Conservatives want to cut your taxes.
People would not know that from what has been done in the last few months.
The Chief Secretary is nodding because he obviously believes it. He also said:
Higher tax and national insurance would hit those who work harder and do overtime.
So why is he imposing rises in national insurance and breaking all the promises that have been made? [HON. MEMBERS: "Tell us why."] When the Chief Secretary goes back to his constituents in Enfield to answer their questions about his failure to keep his promises, will he remain seated there?
The promises that have been broken by the Government are not only on income tax, VAT, and national insurance, but on public services. We are witnessing, in the public spending announcement that came with the Chancellor's budget yesterday, some of the biggest cuts that we have seen in our public investment and public spending budgets.
What did the Prime Minister say about that at the general election campaign? I have gone through the transcripts of the Prime Minister's many press conferences during the election campaign. I have no doubt that Conservative Members will want to discuss with the Prime Minister the views that he put to the electorate on the question of public services. Cutting public spending, he said, would not be "economically right":
If we were going to cut public expenditure we would have done it before and I don't believe it's economically right. I have said that in the past, and there is no need to do it whatsoever. So you can rule out any prospect of that.
He said that it was not possible that public spending might rise or fall, and that there was no prospect of the public spending cuts that we now have as a result of Government decisions.
Is it any wonder that the country will never again believe the Conservatives? Those are broken promises, not only on tax but on the fabric of our social services.
At another press conference during the election campaign, the Prime Minister said:
We will stand by the figures in the Red Book. I see no reason why we should not meet our promises as we have allocated our reserves. We have seen these concerns in the past, and it will not be necessary to change plans.
I do not think the Prime Minister will easily forget that, if he survives for another general election campaign. Either the Government were incompetent on a massive scale that beggars belief, or they were deliberately misleading us throughout the general election campaign.
The Government could plead guilty to broken promises and ask for their incompetence to be taken into consideration, but how could they make the commitments in the election manifesto that have now been overridden by yesterday's statement?
In 1992 the Government said:
Over the next three years we are committed to the biggest investment in Britain's infrastructure in our history.
Why was that commitment followed by an 8·3 per cent. cut in the transport budget? They said:
We believe that the railways can play a bigger part, and are investing accordingly.
Why has the external financing limit of the railways been cut?
The Government said:
The Conservative party's commitment to the environment is beyond doubt.
Why was the environment budget reduced by 13 per cent. yesterday? Why is it that local government is down 1·8 per cent., employment down 3 per cent. and housing down 8 per cent., with the accompanying risk to many homes and construction jobs?
It is not only the promises made during the election campaign that have been broken. At the time of the last autumn statement debate, the Chief Secretary said:
I believe the protection of investment within the public spending round is the best way to boost private investment, the best way to create growth in the short term and in the long term as well.
Why has public investment been cut from £23 billion to less than £22 billion as a result of the announcement made today?
What about compensation for VAT? When the country realises that a family of four on income support will receive only 45p per week to make up for a fuel bill that every expert estimates will be more than £1·20 a week, and when single pensioners understand that they will get only 50p a week although their fuel bills will be much higher than that, no pensioner or family will accept that they have not been short-changed by the Government as a result of yet another broken promise.

Mr. Michael Bates: Does the hon. Gentleman agree with the remarks made 11 days ago by the Opposition's social security spokesman, who said that 50p per week on top of the pension would be adequate compensation? Does he agree that 70p per week, which is what we have put forward for single pensioners, will be more than adequate?

Mr. Brown: That is not what my hon. Friend said. Let me put a challenge to the Conservative Members who signed the early-day motion calling for compensation for all pensioners. They said that compensation had to cover in full the VAT rise. Why is it not doing that?

Hon. Members: Answer the question.

Mr. Deputy Speaker: Order. It is no use hon. Members shouting "Answer the question" if nobody can hear the hon. Gentleman attempting to do so.

Mr. Brown: We should also be clear about what has happened to invalidity benefit. The country and a wider audience should know that invalidity benefit will be cut. A faxed document issued by mistake by the Department of Social Security to the Press Association a few months ago said that the assessment—that is, of the people who would lose benefit—would include a retired builder with heart disease and angina, who gets pain in the chest after excessive bending, is unable to walk on the flat for more than 200 yards before he has to stop and cannot climb stairs. These are the types of people who will lose their invalidity benefit.
If the Chancellor announced today that the business expansion scheme was to be closed, and no more tax shelters created for people to make money out of the miseries of repossessed homes, he would save £100 million before Christmas.
What is the choice that the Government must make? Is their priority to close the tax loopholes that I have identified, or to hit people on invalidity benefit?
What is the Chancellor's record? At the Department of Health he picked a fight with the ambulance workers: at the Department for Education he picked a fight with the teachers; and at the Home Office he picked a fight with the prison officers. But when he was a Minister at the Department of Trade and Industry, did he pick a fight with the City establishment and tax avoiders? Now that he is at the Treasury, is he more likely to be toughest with the weak—strongest with the least able to defend themselves—or will he stand up to people who have been avoiding tax systematically for a long period?

Mr. Nigel Forman: Will the hon. Gentleman give way?

Mr. Brown: I will not give way again.
That is the Chancellor: strongest against the weak, fearless with the disabled and tough on invalids. That is the message that comes from the Budget. As for the Chief Secretary—

Mr. Forman: Will the hon. Gentleman give way?

Mr. Brown: I will not give way again. I have given way on numerous occasions, and on each occasion I have to remind Conservative Members of their own manifesto commitments, which they have broken.

Mr. Forman: rose—

Mr. Deputy Speaker: Order. The hon. Member for Dunfermline, East (Mr. Brown) is clearly not going to give way. I will ensure that both Front Benchers and Back Benchers on both sides of the House are given a fair hearing in reasonable quietness.

Mr. Brown: Let us examine the Chief Secretary's record. He now tells us that he supported the Prime

Minister in the leadership election, not necessarily because the right hon. Gentleman was his personal choice. In a Sunday newspaper, he commented:
The recommendation of Mrs. Thatcher was very clear"—
moving away somewhat from the idea that a decision was made very quickly.
What happens when the Chief Secretary makes statements on tax?

Mr. Jacques Arnold: Will the hon. Gentleman give way?

Mr. Brown: I will not give way again. I have given way a number of times, and were I to do so again I would have to remind the hon. Gentleman of his own election manifesto commitments.
What did the Chief Secretary say in his Enfield manifesto? He not only said that national insurance payments should not rise; he said:
I offer you a vision for the 1990s. It is a society prosperous enough to provide for those in need and invest in public services.
That is the Chief Secretary who has made some of the biggest cuts in public services that we have seen.
What has the Chief Secretary said about tax in the past? He is the man who told us that the poll tax would be an election winner for the Conservative party. Let us remind ourselves of what he said:
Far from being a vote loser, with your help the poll tax will be a vote winner.
A few months after the tax was introduced, he said in a speech:
If this is what the community charge can do for the Conservative party after just one month, think what it can do for us after one year.
The Chief Secretary is a man of few words on tax, almost all of them wrong.
I consider, however, that the Chief Secretary's highest point on the question of tax was reached when he published a pamphlet—only a few months ago, before he became Chief Secretary. It was entitled "A Vision for the 1990s", and one of the main chapters was entitled "Towards an Ultra-Low Tax Economy"—not a low-tax economy, or a very low-tax economy; an ultra-low-tax economy. [Interruption.] The hon. Member for Rutland and Melton (Mr. Duncan) cheers the idea of a low-tax economy. I assume that he will be voting against the Budget on Tuesday.
The Chief Secretary said that lower taxes were "a total political commitment". It might be thought that, if that political commitment was not being met by the Government in which the right hon. Gentleman served—given that it was a total commitment—he would give up, saying that he could not be part of that Government any longer. He said:
Our European competitors lack the political willpower to introduce low-tax policies.
What about the Prime Minister, the Chancellor of the Exchequer and the Chief Secretary himself? Do they not lack the political will power to deliver low-tax policies now?
The right hon. Gentleman also said—I believe that this will resonate throughout the country as we move towards election time—
There is no point in going through a Parliament delivering every little promise you made and failing on the big promises.
What are those little promises? Promises about income tax, about national insurance, about VAT on fuel, about public services and about the social security budget? Those are


not little promises; they are promises that affect the lives of millions of people. The right hon. Gentleman should be ashamed of himself.
Conservative Front Benchers are virtually incapable of keeping their promises, whether those promises relate to tax, spending, recovery or youth employment—or, indeed, to the supposed end of the recession the day after the general election. I believe that they are incapable of telling the difference between truth and falsehood—incapable of telling the truth, or even recognising it; incapable, perhaps, of distinguishing between right and wrong.
How can the Front Bench explain this astonishing record of personal irresponsibility? Recently, the Prime Minister and the Home Secretary have spoken out on moral decline and personal responsibility. Like them, I would resist any tendency to place the blame for breaking promises and being unable to tell the truth elsewhere. As the Home Secretary said:
We should have no truck with trendy theories that try to explain things away by saying someone else is to blame.
That is the view that the electorate will take.
Will the Government now blame the Church of England for the breaking of promises following what they said during the election? Was it the absence of a father figure during the war that prevented their promises from being kept, or is it the tragic loss of a mother figure as recently as 1990 that prevents them from telling the difference between right and wrong? Let us be absolutely clear: the Government are repeated offenders in the business of making and breaking promises. They went joyriding with the British economy, they crashed out of the exchange rate mechanism and they left a trail of destruction and chaos behind them.
The Chancellor began his term of office by admitting that the country was in a dreadful hole. His Budget, however, fails to understand that our problems relate not to too high a quality of services, but to insufficient growth during the period of Conservative government. It fails to recognise that the root of our problem is the smallness and the diminished capacity of our economy. It fails even to appreciate that the problems of trade deficits, unemployment and inflation will return again and again as long as the Government do not tackle these basic and fundamental issues.
This Budget cannot even begin to recognise the importance of the Government's role in helping to secure the investment in people, industry and our social and economic fabric that we need if we are to have a high, sustainable rate of growth. As a result of this Budget, we are worse off today without the slightest prospect of being a great deal better off as a nation tomorrow. It is a Budget without a strategy for jobs, industry and long-term growth, because it cannot begin to address the foundations of the Government's failure.
We wanted a Budget for employment, and the Government cut the employment budget. We wanted a Budget for industry, and the Government cut the industry budget. We wanted a Budget for investment, and the Government cut public investment in our economy. We wanted a Budget for fairness, and the Government ended up penalising 95 per cent. of the population.
This Budget does nothing for fairness, jobs, industry and investment in the way that the country needs. For that reason, it will not commend itself to the country.

The Chief Secretary to the Treasury (Mr. Michael Portillo): Towards the end of his speech, the hon. Member for Dunfermline, East (Mr. Brown) threw down a challenge. He asked whether Conservative Members had political will power. He asked whether my right hon. Friend the Prime Minister had it; whether my right hon. and learned Friend the Chancellor of the Exchequer had it; whether I had it; and whether our party had it. The answer to those questions is yes, yes, yes, yes and yes. Yesterday's Budget demonstrated the existence of that political will power.
Did the hon. Gentleman have the political courage, in a speech lasting half an hour, to mention even one of the Labour party's policies? It was a policy-free zone of a speech, in which the hon. Gentleman did not dare to offer a single thought about what his party would do. This is an unserious shadow Chancellor of the Exchequer, trying to address himself to serious problems that Conservative Members are considering seriously. The hon. Gentleman—who sits practising his smile, because he has been told that that is what he ought to practise—is a man who does not allow a single serious thought to enter his mind, or a single serious comment to pass his lips.
While the hon. Gentleman sits there practising his smile, my hon. Friends have been asking him whether he believes that the deficit is too high. Does he believe that spending is too high? Does he believe that we should put up taxes? What is his party's monetary policy? How will he create all the jobs that he is always going on about? What is his answer to all those questions? When it is not evasion, his answer is to say that it is all being referred to the Commission on Social Justice. That commission is the greatest example of contracting out there has ever been, of which any Conservative council would be proud because all Labour party policy has been subsumed by the Commission on Social Justice.
The commission has now been in operation for a year and in the past few days it has produced its second report on the important subject of social security. What does the commission say after a year of deliberation? It says:
Over the next 6 months we will publish a series of papers explaining some of the tough questions which we believe the country faces: setting out the advantages and disadvantages of different options.
My God. What courage the Labour party shows. What determination it is showing to address our problems. What extraordinary bravery is being shown by the hon. Member for Dunfermline, East and his party, and I shall tell the House why.
It is because the hon. Gentleman knows that his predecessor, the former shadow Chancellor, devised an economic policy and it was a disaster. It was the policy that cost the Labour party the general election. The hon. Member for Dunfermline, East now lives in cowering terror of developing a single strand of policy.

Mr. John Smith: rose—

Mr. Portillo: I shall give way in a moment when I have given the hon. and learned Gentleman something to which he can reply.
The hon. Member for Dunfermline, East has learnt the wrong lesson. The lesson is that if he devises policies that blow the election for his party, he will take over and become the leader of the Labour party.

Mr. Smith: Will the right hon. Gentleman tell the House whether Conservative Members kept the promises that they made about taxes at the general election?

Mr. Portillo: We are keeping the most fundamental promise of all—[Interruption.] That is to deliver sound public finances, on which the Labour party has not a clue, because—

Mr. Deputy Speaker: Order. I recently pointed out to the House that right hon. and hon. Members on both sides of the House will get a fair hearing. The Opposition spokesman got a reasonable hearing; the Chief Secretary will get that same fair hearing.

Mr. Nigel Griffiths: Is the fundamental commitment to which the right hon. Gentleman refers not just a fundamental commitment of the Conservative party to lie its way into power and a fundamental commitment to cling to power at all possible cost?

Mr. Portillo: The hon. Gentleman clearly wants to get into the headlines by being thrown out of the House of Commons for using the word "lie". I shall treat his question with the contempt that that word deserves.
The Budget which my right hon. and learned Friend produced what was he rightly describes as a "no nonsense" Budget, because we face serious problems and the Conservative party put forward a serious solution. I am pleased that my right hon. and learned Friend has delivered a Budget which, after all, had to be tough. He was not able to deliver a lollipop Budget but had to present a lollipop-free zone at a time when we had to tighten the fiscal position. My right hon. and hon. Friends were strongly supportive of my right hon. and learned Friend the Chancellor because the Conservative party is serious about dealing with the problems of the deficit. That is the major contrast between the Conservative party and the Labour party which the electorate will not fail to see when we next face them.
Of course, the problem that we face is a deficit of £50 billion.

Mr. Ronnie Campbell: rose—

Mr. Portillo: I shall give way later. I want to make some progress. The House will be aware that we have a national debt of £200 billion. The public sector borrowing requirement of £50 billion is serious because it represents one quarter of the national debt. If my right hon. and learned Friend and his predecessor the right hon. Member for Kingston upon Thames (Mr. Lamont) had not taken steps to deal with that, obviously there would have been a danger of doubling the national debt over a short period.

Ms Harriet Harman: Why is the PSBR there?

Mr. Portillo: I must tell the hon. Lady some of the areas in which the Government have spent money. In the three years up to 1992-93, the Government have increased spending on the health service by 5·5 per cent. in real terms every year. Over the past five years, they have increased spending on education by a quarter in real terms; they have increased spending on national roads by 60 per cent. in real terms; and they have trebled investment in British Rail in real terms.
On each of those occasions, the Labour party said that we were underspending, that we should spend more, that the health service was underfunded, that we were not investing enough in roads or education and that we ought to invest more in British Rail. Now the Labour party asks why we have such a large PSBR. It says that the Government are to blame and that we should spend more money.
The hon. Member for Peckham (Ms Harman) was at it again on "Newsnight" last night, advocating that the solution to our problems was to spend more money. It is some sort of rich joke that the Labour party appoints the hon. Member for Peckham as its shadow Chief Secretary. It is rather like—

Several hon. Members: rose—

Mr. Deputy Speaker: Order. The Chief Secretary has made it clear that he will not give way and hon. Members should take note.

Mr. Portillo: The irony of putting the hon. Lady in charge as the shadow Chief Secretary is like appointing Joan Collins to buy costumes for an impoverished amateur dramatic club. Tackling the deficit is important for restoring confidence in the economy and ensures that the Government are able to provide the conditions for recovery.

Ms Hilary Armstrong: rose—

Mr. Portillo: I shall give way to the hon. Lady in a moment.
During the past year, when the Government have had to borrow £1 billion a week, we had stable short-term interest rates and, in the past week, we saw them fall. We have also seen long-term interest rates falling. The textbooks on economics say that a large PSBR puts upward pressure on interest rates. That has not materialised, because the Government have established medium-term economic policies for dealing with the deficit, on spending and taxation.
When my right hon. Friend the Member for Kingston upon Thames announced the extension of VAT to fuel and power, many Conservative Members were worried about the timing of that announcement and believed that the delay in its introduction would make lobbying against: that proposition more intense. I say to my right hon. Friend and hon. Friends that it was extremely important when the recovery was still delicate and when many were rightly arguing that the economy was not in a state to bear higher rates of taxation, that the Government should give an assurance that over the medium term they would tackle the deficit. It was necessary to offer that reassurance. The funding crisis of 1993 is the funding crisis that did not occur because there was confidence in the Government's medium-term policies in the markets. It was the dog that did not bark.

Ms Armstrong: The Chief Secretary gave a list of spending increases as the reason for the deficit. Was he not aware of that at the last general election? Why did he and his Prime Minister promise that there was need neither to cut expenditure nor to raise any taxes?

Mr. Portillo: I am perfectly happy to answer that question. We thought that the recession was coming to an end in early 1992. But the question that cannot be answered


by the Labour party is why, in any circumstances, it believes that we should spend more on all those things. Why does the Labour party always urge that we should spend more and that interest rates should be lower than whatever the Government set? Why did it promise high taxes at the last election but now it says that it has no plans for high taxes? Why does the Labour party refuse to answer a single question about its economic policy?

Mr. Dennis Turner: Will the Chief Secretary give way?

Mr. Portillo: I shall give way in a moment.
In devising their policy, the Government have faced along the way an escapist tendency. It comes in various forms, but the great mottoes of the escapist tendencies are, "Why do today what you can put off until tomorrow?" and "Even if it's broke, don't fix it." There are various types of escapist. There are those who say that there is no need for the Government to take action because the recovery will cure all. The recovery will not cure all. Even those elements of spending that are driven up by the cycle during the recession do not necessarily unwind themselves at the end of the recession when the recovery comes.
For example, if the Government build up a higher level of indebtedness, that indebtedness is not swept away by the very fact of recovery. Other escapists say that we should, indeed, take action, but that the time is not ripe. But then the people who say that the time is not ripe are the people who believe that there never is a ripe time for taking firm action.
Then there are those who say that we should take effective action, but that there are spending cuts that can be made and tax rises that can be imposed which carry no pain and no difficulty with them. I have to tell those people that they are wrong. It is not possible to address the problem without facing tough decisions. My right hon. and learned Friend the Chancellor has faced them. The Government are not a member of the escapist tendency. Despite my ethnic origins, I am not in favour of "mañana". I am in favour of taking action today—timely action to put right the deficit that the Government face.

Mr. Turner: Does the right hon. Gentleman accept that his credibility among the Opposition is mightily stretched in as much as he is here today telling us about tax increases when he has always argued for tax cuts? How does he square that with the public outside, who have read his speeches, not over many months but over many years?

Mr. Portillo: I am realistic enough to know that unless we control the deficit and make sure that the burden of debt does not rise and unless we control the amount of interest that we pay on our debt, it will not be possible for us to reduce taxes. I believe in reducing taxes. I believe in the policies of my right hon. and learned Friend the Chancellor of the Exchequer. I believe that they will lead us to lower taxes in due course.
What is stretched on the other side of the House is not my credibility; it is comprehension. Yesterday, the Labour party was in deep disarray. The Leader of the Opposition was attacking us for our savage cuts. Yet I had the fortune to wander in late in the day to discover the hon. Member for Cardiff, West (Mr. Morgan) saying that there had been no reductions in public spending and that the whole thing

had been done by smoke and mirrors and an adjustment to the reserve. I intervened in the hope that he would not make a speech that was so embarrassing to his Front-Bench team or one that was so foolish.
I want to make the position perfectly clear because I have to be fair to the hon. Member for Cardiff, West and say that he was not the only person in confusion. There has been some misunderstanding of the position with regard to the reserves. My hon. Friends will understand that we set reserves for the three years ahead. The reserves in the second and third years of the public spending period are sums of money that the Government fully intend to spend within their plans but that have not yet been allocated to any specific programme. As the third year becomes the second year of a new survey and the second year becomes the first, the portion of the reserves allocated for that year —a third of the total reserve—is drawn down and allocated to programmes.
In this year's Budget and public spending round, we ensured that as the second year became the first year we did not allocate that reserve to programmes. We allocated it in such a way that we could reduce public spending. What we saw in operation was not smoke and mirrors or fiddles but the exercise of resolution by the Cabinet and the Government. It was the exercise of absolute discipline on public spending.
We have allocated as reserves for the next three years £3·5 billion in the first year, £7 billion in the second year and £10·5 billion in the third year. The previous plans included reserves of £4 billion, £7 billion and £10 billion. The House will recognise that the total for the three years is exactly the same. So the hon. Member for Cardiff, West was wrong. I am not surprised that members of the Labour party are not able to recognise discipline when they see it and are not able to recognise resolution and collective action by the Cabinet in making sure that the public spending is under control.

Mr. Ronnie Campbell: Will the right hon. Gentleman give way?

Mr. Portillo: Last year, when we reviewed our plans for 1994–95, we took £4·75 billion off the new control total —the plans for 1994–95. This year, in revisiting those plans, we took another £3·6 billion off the plans for what we were going to spend in 1994–95. The plans for the new control total over the next three years are reduced by a total of £8 billion. That means—I know that my hon. Friends will be pleased with this—that we have The new control total so firmly under control that in the next three years its average rate of growth will be 0·25 per cent. in real terms each year. The House will recognise that that is a good distance below the maximum target that the Government set themselves of 1·5 per cent. growth in the new control total year by year.
Not only spending within the so-called new control total is under control and is being reduced; a virtuous circle is being established because we are seeing that debt interest will be reduced by £1 billion a year from 1996–97.

Mr. Ronnie Campbell: Will the right hon. Gentleman give way?

Mr. Portillo: In a moment.
Cyclical social security will also be lower as the recovery comes through. That means that, in the figure of total public spending—the grand total of public spending


known as general government expenditure—we are seeing a reduction over the next three years of £15 billion of public spending. That is what has enabled us to reduce the proportion of our national income which is taken and spent by the Government from 45 per cent. to 42·5 per cent. over the period of the public expenditure survey.
That is the way in which we shall meet the important promise that we gave in the Conservative manifesto that the Government would reduce over time the proportion of national income that was taken and spent by the Government. That is a fundamental Conservative pledge and one which my right hon. and learned Friend the Chancellor succeeded in delivering in his Budget yesterday.

Mr. Peter Mandelson: Before the Chief Secretary embarks any further on his virtuous circle, does he recall the commitment which the former Chancellor made in the autumn statement last year to 78 public/private finance projects? How many of those are currently under construction?

Mr. Portillo: We have seen some good progress, but as my right hon. and learned Friend the Chancellor said, it has fallen short of what we hoped for. That is why my right hon. and learned Friend yesterday moved in with some radical new proposals to ensure that the private finance initiative delivered good results. We have seen bridges built, important projects in the national health service and an important contribution to the Jubilee line.
My right hon. and learned Friend put great impetus into his initiative yesterday by announcing, for example, that the west coast main line would be a subject of the private finance initiative. That statement is welcome to Conservative Member, even if the very mention of private finance is anathema to the hon. Member for Hartlepool (Mr. Mandelson).

Mr. Ronnie Campbell: Will the Chief Secretary give way?

Mr. Portillo: The hon. Gentleman has been very persistent so I give way to him.

Mr. Campbell: The Chief Secretary talks about the deficit. How was it created? If my memory is right, I remember the £100 billion from North sea oil which went down the drain. I remember the money from the nationalised industries. It was an enormous amount. We had billions from there. I remember the poll tax fiasco—nearly £4 billion. I remember Black Friday, where we lost £5 billion in one day. The Chief Secretary is the one who has caused the mess-up in the finances of the country, not us.

Mr. Portillo: The hon. Gentleman has inadvertently, I am sure, stumbled into quite a good point. During the 1980s, North sea oil revenue was contributing about 4 per cent. of gross domestic product in tax receipts to the Government. Today, it produces only half of 1 per cent. of GDP. That is an important difference. That is one of the reasons why my right hon. and learned Friend thought it appropriate yesterday to build new elements into the tax base—to broaden it—by introducing two new taxes: an insurance premium tax and an air passenger duty.

Mr. Gordon Brown: Will the Chief Secretary confirm that the typical family will have to pay almost £10 a week

more in taxes from April? Will he now apologise for breaking the promises made by himself and the Conservative party over taxation at the election?

Mr. Portillo: I do not know what a typical family would be described as, but I must say this to the hon. Gentleman, and then the contrast between our seriousness and his flippancy will be evident: it is not possible to cure a public sector deficit of £50 billion without some restriction on public spending and some increases in taxation.
It is banal of the hon. Gentleman to get up all the time and so glibly tell us that taxes have gone up. Of course they have gone up, because we are serious about putting right public finances. The hon. Gentleman is not serious about anything and the contrast shows. He is under-performing for somebody in his position.

Ms Harman: So is the right hon. Gentleman.

Mr. Portillo: The hon. Lady may say that, but she is held inside the shadow Cabinet by the safety net of political correctness; otherwise, she would not be there at all. That is not my judgment about who is underperforming, but that of the Labour party.

Mr. Brown: If the Chief Secretary is performing well, will he now answer my question? Will the typical family pay £10 a week more in taxes next April, and will he apologise for breaking promises on taxation at the election?

Mr. Portillo: Different families pay different amounts, and I am not disguising the fact that people will pay more in taxes. Does that satisfy the hon. Gentleman? We are taking serious action to put right the problem. He continues to pretend that no serious action needs to be taken. His is a position of profound irresponsibility.

Mr. Clive Betts: The Chief Secretary has just said that everyone knows that it is not possible to deal with a £50 billion deficit without increasing taxes or cutting public expenditure. Why did he not say that at the time of the general election? In his previous answers, he said that he thought that the end of the recession would come earlier and that that would provide the revenues. In answer to my hon. Friend a few minutes ago, he said that only people of an escapist tendency believe that growth could cure the £50 billion deficit. Where is the consistency in that argument?

Mr. Portillo: I was talking about views taken at different times. At the beginning of 1992, it appeared not just to the Government but to all major commentators, and the Labour party, that the recession was about to end. In late 1993, it is not possible to take the view, with the deficit having risen to where it is, that recovery on its own will be sufficient to deal with the problem.
I should like to deal with the way that the Government will approach the cost of running the Government. At a time when people in the private sector have had to go through severe restraint, when they have seen their incomes under great pressure during the recession, it must make sense for the Government to ensure first that their running costs are firmly under control.
That is why there will be no increase in the cost of running the Government between this year and next year. I do not mean no increase in real terms; I mean no increase


in cash terms. We shall have to fund any pay increases that there are in the public sector from efficiency gains and savings that we make inside the public sector.
That will be possible because we set demanding efficiency targets for the public sector and public bodies. We normally expect them to be achieving a 2 or 3 per cent. improvement in efficiency each year. Out of those improvements in efficiency must come any pay settlements that are made in the public sector.
As a result of that, over a period, we shall see a reduction in the proportion of public spending that the Government spend on running themselves from 8·2 per cent. down to 7·4 per cent. That is an important reduction in the amount that the Government are taking away from taxpayers to spend simply on running themselves.

Mr. William Cash: Is not one of the most important features of the Budget the emphasis on enterprise in small businesses, and is not that the means whereby we can regenerate the economy to pay for so much of the public expenditure that is required? Is not another essential part of the budget the rejection of the Delors package and of the movement towards the policies advocated by the hon. Member for Dunfermline, East (Mr. Brown) and others—to increase public expenditure as a means of getting out of the problems that it merely precipitates?

Mr. Portillo: My hon. Friend is right. All we have to do is look at what happened as we recovered during the 1980s. The engine of our recovery was the small business sector. It was able to expand in that way because of the flexibilities that existed, particularly within the British labour market. I believe that it will be the same during recovery this time around.
My right hon. and learned Friend has taken a series of important measures to help the small business sector. As a Government, collectively, we have taken a united stand against all those who would wish to impose on the British economy the rigidities and extra costs that would be the death of that effort to ensure that small businesses can again be the engine of our recovery, as they were during the 1980s.

Mrs. Angela Browning: My right hon. Friend has received may challenges from the Opposition Benches tonight about election promises. Is he familiar with my election address in the 1992 election in which I stated categorically to my electorate that we would build on the 20 per cent. tax band, which is enormously important to low-paid workers in my constituency, and that we would maintain sound money? It would be difficult for me to go back to my constituency and hold my head up under that promise if we were to implement some of the suggestions that have come from the Opposition Benches tonight.

Mr. Portillo: I have read my hon. Friend's election address less frequently than I would wish, but equally I have read "War and Peace" only once in my life, so she must not be offended. My hon. Friend is absolutely right. There will be further progress with the 20 per cent. tax band from April 1994.
My right hon. and learned Friend has set out clearly what his monetary policy is. He has made it perfectly clear that he will not follow the policies advocated by the Opposition.

Mr. Alistair Darling: Will the Chief Secretary give way?

Mr. Portillo: No. I am going to finish.
For the Conservative party, sound public finances are the predominant economic policy that we must follow. It is the policy that takes precedence. I remind my right hon. and hon. Friends that, in 1981, in pursuit of sound public finances, we faced a Budget from Lord Howe that required us to take heavy tax increases. As a party we accepted that because, for us, sound public finances were the most important of all our economic objectives.
I share my right hon. and learned Friend's judgment that he made yesterday about the speed at which he reduces the PSBR. I congratulate him profoundly on being able to achieve the reduction that he seeks with so much emphasis on the control of public spending and with so little raising of taxes, particularly in the year ahead.
The Conservative party believes in low taxation and keeping down the rates of taxation, because we believe that high rates of taxation have a profound effect on incentives. As rates of direct taxation are raised, they tend to drive out of the country those people who create wealth.
The search for extra revenue by raising the rates of direct tax usually proves elusive, because the people who create the wealth up sticks and go somewhere else to do their business and take their wealth creation with them. We are a country that is profoundly concerned about competitiveness. I echo what my hon. Friend the Member for Tiverton (Mrs. Browning) said a moment ago: we are profoundly concerned about competitiveness. The country attracts one third of all inward investment from outside the Europen Union, yet 45 per cent. of our national income is spent through the Government. In the United States, the figure is only 38 per cent., and in Japan only 32 per cent.
To be an internationally competitive nation, we must keep public spending as a ratio of national income down to an internationally competitive level so that we can enjoy internationally competitive rates of taxation. Thanks to the policies of my right hon. and learned Friend, we are enjoying internationally competitive rates of taxation for both personal and corporation tax, but we must still reduce the proportion of our national income that is spent by the Government.
My right hon. and learned Friend has pointed the way in which that will be achieved and charted the steady progress that we shall make in reducing the proportion of national income taken by the Government. Not least for that reason, I commend his Budget to the House with great enthusiasm.

6 pm

Mr. David Rendal: It is a great honour for one who has come to the House comparatively recently to be able to speak so early in the Budget debate. I imagine that a number of hon. Members who have been here longer than me will feel envious of my opportunity. I have some advice for them, which I have given to many other people: they should join the Liberal Democrats because that gives one a better chance.
We are in danger of going into great detail about the Budget when there are one or two critical points about it


that should be brought to the attention of the House and public. As a result of a combination of the Budget in March and yesterday's Budget, next April we are due to have the largest tax hike in history. The Government cannot get away from that. Nobody expected it after their promises in the election and they should be deeply ashamed of it.
The Government would no doubt like to believe that the taxes are mainly indirect, and there are indeed a number of indirect tax increases in line. They have always said that, as long as tax was taken indirectly, it would not matter and that the important thing was to reduce direct taxation.
I shall begin by reminding the House of some of the indirect taxes that will be put into effect. First, there is the obnoxious imposition of VAT on domestic fuel. We have all heard a great deal about that over the past year, and, sadly, it was clear from the Chancellor's statement yesterday that he failed to listen to the pleas of electors who told him what should have been done—cancellation of that tax. The reaction of the electorate has been shown in Newbury, in the council elections, in Christchurch and in council by-elections ever since the imposition of the tax was first announced.

Mr. Jacques Arnold: Is it not true that at the last general election the Liberal Democrats fought a campaign based on an energy tax? Can the hon. Gentleman explain what that energy tax would have been?

Mr. Rendel: I shall come to that point later.
The important point is that the imposition of VAT has been rejected wholesale by the people. As I was saying before I was interrupted, people have made that rejection clear in the council by-elections since May, in which the Conservative party has succeeded in losing two thirds of all the seats that it fought. That is an unbelieveable and unprecedented record of electoral failure.
It is true—we have said it plainly and we have been extremely honest about it—that we believe that there should be fuel tax increases; but they should be introduced in the right way. Time and again, the Liberal Democrats have made it plain that they are prepared to support energy taxes when they are aimed at reducing pollution and not simply at cutting the Government's deficit. Such taxes should be introduced in a way that would help those who are worst hit by them.
The second of the indirect tax increases is that on petrol tax, which was introduced yesterday. That was the second huge increase in nine months. I well remember at the last general election the Conservatives in my constituency, and no doubt elsewhere, putting on the frighteners and saying that people should not vote Liberal Democrat because we would increase petrol tax by as much as 10p a year.
We had honestly and openly said that we believed that there should be a petrol tax increase of 10p a year. We did not believe in an increase of 30p in a year, which is what we have had from the Conservatives. That is a huge increase, which will bear most heavily on those in rural communities, who have suffered from bus deregulation and who have now lost all public transport services and are totally dependent on the use of their private cars for transport.

Mr. Jacques Arnold: Will the hon. Gentleman give way?

Mr. Rendel: I have already given way once, and that should be sufficient for the hon. Gentleman.
Those who have lost their public transport services in rural areas will be those most hard hit by the increase in petrol tax. In the last general election campaign, the Liberal Democrats made it plain that we would introduce a scheme to help such people before any petrol increases were introduced by our Government. Such a promise was notably absent from the Chancellor's statement in spite of the fact that he must know, as we all do, how hard people in the rural communities will be hit.
Thirdly, the Budget introduced an indirect tax on insurance premiums. One would have thought that insurance premiums were close to the heart of the Conservative party. Have not the Tories said that people should stand on their own two feet and look after themselves? Surely one way in which members of the public can look after themselves and make sure that they do not rely on the state to finance them when disaster strikes is through insurance policies, but here are the Government discouraging people from insuring themselves.
Fourthly, there is the tax on air passengers, with all the disadvantages that that will bring to those who are trying to export and those who wish to travel abroad to get more sales for our goods in foreign parts. Again, one would have thought that the Government would do their best to encourage rather than discourage exporters.
It is important to add that, in the past, the Liberal Democrats have said—I come here to the intervention of the hon. Member for Gravesham (Mr. Arnold)—that we support a carbon tax. Recent figures on the European proposals for a carbon tax show that, as they now stand, they would cause a petrol tax increase of about 6p a gallon —a great deal less than the increase that the Conservatives introduced yesterday.

Mr. Jacques Arnold: Will the hon. Gentleman give way?

Mr. Rendel: I have already allowed the hon. Gentleman to intervene, and I have now answered his question.
Let me now deal with direct taxes. While the Conservatives have always claimed that the one thing they would not do was increase direct taxes, whatever happened to indirect taxes, that is what they have done. Not only did the last Budget effectively introduce a 1 per cent. increase in tax on everybody's wage packet through the increase in national insurance contributions—an increase that hits all except the super-rich who do not pay national insurance on the top slice of their earnings—but personal allowances have been frozen. In real terms, even if not in cash terms, that effectively means an increase in the income tax take.
There will also be the reductions in mortgage interest relief, which will take place both next April and the following April, and a similar decrease in the married couple's allowance and in all the allowances that go with that. Those will mean real cash losses for many families. All the direct tax increases—which the Government promised they would never introduce—will hit hardest, the public sector employees who have no extra money with which to pay them because of their zero increase in pay next year. Is the Conservative party a tax-cutting party, as it has suggested? Frankly, what hypocrisy. The Conservative party has raised tax more quickly than has ever been done before.
For what are all the tax increases intended? First, of course, they are intended to reduce the Government's debt which has resulted from their gross mismanagement of the economy. We have heard a lot about the Government getting public sector finances right. Are the Government really going to pretend that they were aiming at sound public finances when they ran up a public sector debt of £50 billion? Again, what hypocrisy.
The Government, despite their tax-raising measures, are not investing in our future by investing in education. We heard nothing about investment in nursery schools, despite the fact that we have been told time and again that, for every £1 which is invested in nursery schools, the state will eventually reap £7 in terms of reductions in crime and social security pay-outs and the increased profitability of our economy. That £1 would release £7, yet we heard nothing about investment in nursery education in the Budget.

Mr. Iain Duncan Smith: The hon. Gentleman has made clear his opposition to the £50 billion deficit. Given that at the previous general election his party said that it would put one penny on income tax to pay for education—therefore, that must be taken out of the equation—will he tell the House exactly what other taxes he would levy to get rid of the deficit?

Mr. Rendel: My party said at the election and has said recently that we would raise income tax by one penny to make sure that the educational needs of the country were met. We have produced also a number of further proposals to put people back into employment. That is the most important way in which we can reduce the deficit in future, as I shall show later in my speech.
There are other areas of expenditure where the Government have failed to make the necessary investment. We are seriously under-investing in our infrastructure, our public transport, our roads and our housing.
It is also highly significant to examine the public sector net worth. Figures produced recently by Gavyn Davies, one of the Government's advisers, show that the public sector net worth increased year after year until the early 1980s. By that time, it had reached—depending on how one calculated the figures—between 70 per cent. and 100 per cent. of GDP. The net worth increased consistently under both the Conservatives and Labour until that time. Since then, it has fallen consistently, until it is now only 10 per cent. of GDP and is still falling. Indeed, in a few years the net worth is likely to become negative. In practice, we would then have a Government sector with a net worth of zero — effectively bankrupt.
A result of that can be seen in a survey by the World Economic Forum of 22 modern industrialised countries. Britain comes 22nd in infrastructure investment, 20th in quality of education, 21st in commitment to research and development, and 22nd in number of qualified engineers.
There was some good news in yesterday's Budget statement. I commend the Chancellor for his promise to study the matter of interest on late payments. That excellent idea was produced in the Liberal Democrat manifesto at the election and has, like so many of our good ideas, been pinched. Sometimes it takes the other two

parties some time to pinch our best ideas. On this occasion, it has taken the Government two years even to get around to thinking about it.
It is a pity, perhaps, that the idea was not in the Government's manifesto at the election. Come to think of it, that might have been the kiss of death, as they have turned over most of the other things which were in their election manifesto.
I will now talk about housing. The Budget statement contained a cut in the housing budget of over £500 million, or about 10,000 new homes between the Housing Corporation and the local authorities. Of course, the construction industry has been particularly hard pressed during the recession. There are few better ways of bringing us out of recession and into recovery than by investing in housing to get the construction industry off its knees.
There is another important reason for investing in housing. The Conservatives claim to be the party of the family, in spite of the Chief Secretary's admission just now that he did not know what an average family was. Housing is one of the main causes of family break-ups. A lack of housing and poor housing are two of the main reasons why parents do not stay together.
I should like to tell the House about one family in my constituency, and perhaps theirs is the saddest case I have yet to come across. The family has six children. The parents and the youngest daughter were living in one of the three bedrooms. Four children lived in the second bedroom. I was told that the four children shared a couple of bunk beds. I assumed that there were two pairs of bunk beds, so each child could have one bed, but that was not so. When I went upstairs, I discovered that the four children shared one pair of bunk beds.
In a third room, another daughter who was married lived with her husband and their one son. Needless to say, the family was under considerable stress. I fought to get them rehoused, or at least the eldest daughter and her husband and child. Sadly, I was not successful and eventually the parents had to evict them. [HON. MEMBERS: "Was it a Liberal council?"] At that time, the Liberal Democrats were not in charge of Newbury district council. We have been since, perhaps as a result of the incident about which I am talking.
The young couple were evicted by the parents. The couple were, of course, temporarily housed as an emergency priority case by the council and they eventually moved into other accommodation. Sadly, that was not before the family had broken up. The husband could stand it no more, and moved out. The Conservatives call themselves the party of the family. Yet they refuse to put money into housing which is needed to make sure that such terrible cases of family break-up do not continue.
Local government is the other area for which I have special responsibility for my party. Standard spending assessments have increased this year by 2·3 per cent., a level far too low to allow local government policies to remain even at the levels they are at now. Services will have to be cut again next year. The services which will be cut will be especially those which councils are not statutorily required to provide, because it is those that the councils will find easiest to cut.
One of the services which I suspect will be cut first is crime prevention. That is not at present a statutory requirement, but it is a service on which the best local councils are trying to concentrate. That service will be almost certainly cut and, as a result, we can expect crime


to increase. The Government have claimed that they want to do something about the rising crime rate. Why will they not give local government money to invest in crime prevention?
Another interesting point about local government which came out of the Budget is the question of capital receipts. For a long time we have known that local government capital receipts have not for the most part been fully used. Certainly many are in the hands of local government but cannot be used for further investment or revenue spending. What a contrast, then, between what local government is allowed to do with capital receipts and what the Government allow their Departments to do with them. Yesterday we heard that the Ministry of Defence will sell a lot of its housing. The money will go directly into reducing the amount of net revenue spending. That is not something that it will be allowed to do; it is something that it will be forced to do—in complete contrast to what happens in local authorities.
It is not just that there will be a huge hike in taxation; there are also huge cuts in spending. How will that help us to recover from the recession? What should the Chancellor have done? He should have cut unemployment, not unemployment pay. That, surely, is the main answer to his problems. Unemployment costs nearly £10,000 per head per year. Instead of cutting unemployment by means of the investment measures necessary, he attempted to balance his figures—just as, he told us, he did at the general election—by some fanciful forecasting, instead of getting the figures right, and by cutting other parts of the social fabric.
This country needs a Government who are prepared to invest in our future, our children's edcucation, in housing, infrastructure, public transport and all the other areas of Government spending where investment has been so low in the past. This Government have consistently disinvested. That is why the Chancellor's Budget is a failure and why the House should reject it.

Mr. Alan Howarth: My right hon. and learned Friend the Chancellor of the Exchequer has mapped out the path to restore balance to our public finances and, of course, he had to do so. Otherwise, our public indebtedness would have driven us back into high inflation and high interest rates, which would have meant a harsh future of worse unemployment and poverty.
My right hon. and learned Friend has sought to be fair in his tax increases. He has recognised that the strong should help the weak. Substantial tax increases are to be laid on the better-off. The thresholds for higher rate income tax, inheritance tax and capital gains tax have been held. The measures against avoidance, against people who get paid in gold bars or pretend that a sale is an exchange to avoid stamp duty, are right, particularly when the Government are also, rightly, tackling social security abuse. The insurance premium tax will fall progressively on the better-off.
Although the Government have had to announce spending cuts that we would not ideally have wished, notably in the housing programme, my right hon. and learned Friend has found substantial savings in planned expenditure while protecting the welfare state. He has been able to reduce the contingency reserve because of the fall in inflation, which means that a smaller cash sum is needed

to purchase a given volume of activity and enables the cost of debt service to be reduced. These are rewards of the disciplined approach to economic management that the Government have pursued and that the shadow Chancellor of the Exchequer and, these days, even the Tribune Group know to be necessary.
I am pleased that my right hon. and learned Friend ignored some of the more draconian counsel offered to him. He has not cut spending programmes massively. He has increased taxes, but he has also somewhat eased monetary policy, and he is strongly placed to ease it further if growth should falter. I hope that he will be disposed to do so. He has stressed his commitment to growth. That is the only way to restore balance without pushing us back into recession and all the social damage that goes with it.
Above all, we need to generate jobs, more jobs and better jobs. My right hon. and learned Friend's macro-economic strategy is well designed to enable that. There is also a series of micro-economic measures which will support job creation.
My right hon. and learned Friend stressed the crucial role of small businesses in generating new jobs. I welcome his raising of the profits limit for small businesses paying corporation tax, his significant increase in the turnover threshold for VAT registration, his measures to encourage venture capital, and his help for small businesses on late payments.
I also welcome the reduction in national insurance contributions for employers in respect of lower-paid employees. Although our objective should be not low pay but high pay well earned, above all, it is important to help people to get jobs. The human as well as the economic waste of unemployment is a basic challenge to our society and to the Government.
My right hon. Friends are right to be troubled by the size of the social security budget, not because we should not support people in poverty as generously as we can, but because high spending on social security is an indicator of systemic failure.
A large proportion of social security expenditure derives from unemployment. A decent society and a properly functioning economy aim to involve everyone —all our people—and not to leave some of our people isolated on the margins of society, eking out a meager existence on benefits. Moreover, the more we spend on the relief of poverty, the less we have available to spend on other decencies and necessities—better health care and better education.
I am pleased, therefore, that my right hon. Friends are seeking to tackle the roots of the problem of high social security spending by setting out to remove the obstacles to employment. I am very pleased that my right hon. and learned Friend the Chancellor yesterday declared unequivocally his commitment to the welfare state and reassured us that the Government do not intend to dismantle it.
He has found extra resources for training and education. I welcome the new apprenticeship scheme and the Government's commitment to extending opportunities in further education. The French, too, have responded to economic difficulties by increasing their investment in education. If we are to be competitive, we can do no less.
I particularly welcome the disregard for child care costs of up to £40 a week that is being introduced into family credit, disability working allowance, housing benefit and council tax benefit. The Government have already made


significant advances in reducing the poverty and unemployment traps. We need to go considerably further still.
However, for many people the costs of child care have been the final and decisive obstacle to getting into paid employment, thereby achieving the release that they want from dependence on benefits. My right hon. Friends have done the right thing here, and I am glad that they dismissed, as of course they must, the harsh fantasies with which some toyed, about cutting benefit for children of lone parents.
With this measure of support for child care costs, my right hon. and learned Friend has shown that he is willing to spend more money in the short term to recoup public expenditure in the medium and long term. He is fully justified in that approach. There is no reason to think that the markets will not tolerate borrowing to finance public expenditure, which is part of a convincing programme of investment.
I welcome the new presentation of figures in the Red Book, which separates borrowing for purposes of current expenditure and borrowing for investment. The figures presented as borrowing for investment represent sums intended to be spent on physical capital investment.
For me, the most interesting section of the Red Book is contained in paragraphs 5A.15 to 5A.19 on page 111. In paragraph 5A.15 it is acknowledged that
some spending that is conventionally considered as current, such as that on education and training, research and development, or health care, can be considered to produce a stream of future benefits in much the same way as purchase of physical assets.
Very fairly, the Red Book continues in paragraph 5A.17:
assessing the investment element of such spending raises some extremely difficult measurement questions.
However, the conclusion which so much encourages me is in paragraph 5A.18, which states:
it is important to bear in mind that future productive capacity in the economy is supported and developed by spending that is not covered by the normal capital spending definitions.
My right hon. and learned Friend is right to pursue with determination a policy which eliminates borrowing for current expenditure, which is just that, particularly if it is wasteful expenditure. He should also be prepared, however, to increase investment in human capital. As rapidly as, in his judgment, the understanding and tolerance of the markets will allow, he should invest not only in child care, but in high-quality play facilities and well-trained play workers.
Recent terrible events have underlined the horrors of what children's play can mean in circumstances of trauma and neglect. Conversely, good play facilities and guidance offer enormous benefits to early learning and to the development of personality. I hope that the Government and local authorities will provide more support for such provision, particularly in areas of social deprivation.
We should also invest on a larger scale in nursery education. I was encouraged to gather that my right hon. Friend the Prime Minister personally attaches importance to that. We should invest more fully in the whole of our education system, building on the progress that we have made. In particular, we need a proper system of support for part-time students. The Government are right also to maintain their support for civil science and technology.
My right hon. and learned Friend the Chancellor should maintain a sizeable programme of investment in so-called

human capital. The Government are justified in borrowing to invest in that programme, in the same way as a private enterprise borrows to strengthen the capacity of its work force and its ability to create wealth. Investors will support investment of that type in the public sector in the same way as they support private sector investment.
I do not like the term "human capital", any more than I like the term "consumer". Those economist's metaphors suggest a limited view of humanity. I prefer to think in terms of us acting together to support our fellow human beings to develop their strengths and to enable them to contribute more to our society.
In that spirit, I hope that my right hon. Friends, as they consider the future of the welfare state, will not feel constrained, either by economic imperatives or by their social vision, to place further emphasis on means testing. In a year in which employees' national insurance contributions are to rise, I am sony that contributory benefits will be cut with the proposed introduction of the job seeker's allowance and incapacity benefit.
I hope that my right hon. Friends will proceed cautiously and sensitively on the issue of invalidity benefit. I know that they have commissioned research into the operation of invalidity benefit, and I believe that they have yet to receive its findings. Therefore, I am not clear on what basis my right hon. Friends contend with confidence that significant sums are being paid in invalidity benefit to people who are not genuine invalids. In eight out of 10 claims referred to the Benefits Agency medical service, I understand that the general practitioner's decision to certify eligibility has been upheld.
The Department of Social Security commissioned research by Erens and Ghate, which makes it clear that the reason for the growth in the numbers of invalidity benefit claimants is not that more people are coming on to the benefit, and it finds no evidence of extensive abuse. It shows that it is difficult for people to get off invalidity benefit.
The rational policy response is then to help employers to keep chronically sick and disabled people in work, and to encourage employers, particularly previous employers, who are the most likely to do so, to recruit them back to work. I fear, however, that the measures on statutory sick pay and the previously announced requirement that employers should pay 50 per cent. of the cost of specialist equipment for disabled people, will tend in the opposite direction.
I fear that they will frustrate the Government's intention to reduce their spending on invalidity benefit and incapacity benefit. Will the Government also consider carefully the case for legislation to outlaw discrimination against disabled people in employment?
Against the background of plans to reduce expenditure on invalidity benefit, I am glad that my right hon. Friends have considered other ways to help disabled people into work. They have removed disincentives—the loss of free prescriptions and help with dental care—which have prevented take-up of disability working allowance. They have also applied the child care disregard to disability working allowance recipients. That is good.
At no extra cost, the Government could also allow social services departments to make direct cash payments to severely disabled people instead of providing help in services. In that way, disabled people, through their added inde
pendence, would have a better chance of entering employment.
I urge my right hon. Friends to reconsider the virtues of universal benefits as against targeting. The arguments have been rehearsed many times. Means-tested benefits are complex for recipients and administrators; they create unemployment and poverty traps; their take-up is poor; and they fail to provide security. The uncertainty that attends them means that they discourage efforts at self-help. Unhappily, a stigma goes with them. With little constituency of support among the better-off for improving means-tested benefits, those benefits are less than generous.
By contrast, universal benefits are secure. They provide incentives to work, since there is no penalty of withdrawal. They are easy and cheap to administer, and take-up is high. Contrary to what is often said, they are also targeted, as they effectively redistribute income from better-off taxpayers to people on middling and low incomes, and redistribute income over the life cycle to help people in times of greater need. Some 75 per cent. of expenditure on child benefit goes to families on incomes of less than —200 per week. Most importantly, universal benefits give all of us a stake in a shared system.
For the same reason, we should not erode the contributory system, which is the most effective way to commit us all to support each other through decent benefits.
The welfare state is affordable. As Mr. John Hills recently explained in "The Future of Welfare":
even if benefit levels kept up with overall living standards, the total net effects on public finances over the next fifty years would add up to an addition of about 5 per cent. of GDP—no more than the increase (mainly due to the recession) over the past three years.
We cannot, indeed, afford not to sustain and strengthen the bonds of our society.
I do not, of course, argue that everything must be provided directly by public expenditure. I do not argue at all against reform of the welfare state. I congratulate my right hon. Friend the Secretary of State for Social Security on his willingness to promote a rational debate on the future of the welfare state. I agree with him that welfare provision should not be monopolised by the state, and that we should think, as Beveridge did, in terms of a welfare society. We should promote the generous virtues, not only through the agency of the state.
I welcome the sensible and overdue decision to encourage the participation of private capital in public works—not only roads, but hospitals and schools. I want the Government to develop this philosophy of mutual support and cohesion.
Their vision of the role of the voluntary sector remains to be developed. I welcome the new provision that a person on incapacity benefit will be able to do 16 hours of voluntary work without losing the benefit. Could the Government bring that provision forward ahead of 1995? Are the Government applying a similar concession in relation to unemployment benefit and the job seeker's allowance?
I was sorry, however, that my right hon. and learned Friend the Chancellor did not have something to say in his Budget speech about the role of the voluntary sector. While I appreciate that this is not an easy time for the Government to provide more fiscal relief for the voluntary and charitable sector, if the Government want that sector to work in partnership with statutory services—sharing responsibility for programmes in the public interest—they

must develop a clear and consistent set of principles for enlisting it. They must not load an extra tax burden on that sector, as both this year's Budgets have done.
I offer these thoughts in a constructive spirit, which I hope matches the generosity of spirit of my right hon. and learned Friend the Chancellor. He balances intolerance of what he characteristically calls "nonsense" with a recognition that the Government exist to help us all achieve the good purposes that we cannot achieve either individually or in private groups.
Wealth does not simply trickle down: we have learnt that, I take it. The rebalancing of our public finances should also be the rebalancing of our society, between public and private, and between rich and poor. To balance competition with mutuality, discipline with compassion, and the individual with society, is the true Tory tradition.

Mr. John Hutton: It is a pleasure to follow the hon. Member for Stratford-on-Avon (Mr. Howarth), who made a sensitive and—I do not want to embarrass him—thoughtful speech. I was sorry to hear that he intends to support his right hon. and learned Friend the Chancellor of the Exchequer in the Division Lobby. I was unable to detect much by way of support from the hon. Gentleman for the proposals from the Government Front-Bench team. Of course, that is a matter for the hon. Gentleman. He made some thoughtful and enlightened comments, especially about the need for public sector welfare provision.
I shall not pursue the hon. Gentleman's line in support of the Budget, because I and my hon. Friends intend to oppose it. It does not provide a strategy for future economic growth; the Budget is about paying for previous Government mistakes.
Some aspects of the Budget can be given a modest welcome. For example, the efforts to close tax loopholes are welcome, although the Government could have gone significantly further. We also welcome the increase in tobacco duty, but the Government's credentials on health issues would have been substantially advanced if they had also proposed a ban on tobacco advertising.
The new child care allowances are a welcome step, and I was intrigued to hear that the Government are to introduce proposals to boost investment in the west coast main line. That issue directly concerns everyone in the north-west, and we look forward to hearing from the Secretary of State for Transport about a specific timetable for that investment. We have heard many promises and we have pressed the Government on previously publicised private-public sector investment programmes, but we are still waiting for progress on many of them.
The Government's overall strategy is fundamentally flawed, and the Budget strategy reflects that fact. I doubt whether it could be said that the Budget has any overall strategy, other than short-term and immediate political imperatives. The proposal about compensation for VAT on fuel bills has caused considerable concern. Careful news management has created the impression of great generosity towards pensioners and those on benefit, but it is undeniable that the measures still will not cover the full increase in electricity and gas bills. People should be aware of that reality.
The hon. Member for Stratford-on-Avon said that: the imposition of a tax on insurance premiums was


progressive. It is regressive, and will have a bad impact on families and householders on fixed incomes. It will be a serious penalty on families who have the misfortune to live in high-crime areas, and particularly in inner cities.
It could be described as a tax on the victims of crime, because people who live in high-crime areas constantly worry about their insurance on home contents. As people who live in inner cities will testify, through no fault of theirs, the cost of that insurance is extremely high, and a tax on the premiums is a tax on the innocent victims of crime. That is extraordinary when viewed against the background of the Government's much-trumpeted policy on tackling law and order and, in particular, the Home Secretary's claim to put the victims of crime at the centre of that policy.
The Opposition have welcomed a limited number of measures in the Budget, but, as I have said, the Budget is not a comprehensive strategy for growth, investment and jobs. The limited measures that we have welcomed are helpful but, sadly, they lack any overall shape or strategy. The Government do not have a policy to boost investment in the public and private sectors, and it is not clear which part of the Budget will stimulate economic growth. Such growth seems merely to be assumed rather than underpinned by any specific, concrete measures.
According to estimates from the National Institute for Economic and Social Research, capital spending by the public sector has slumped from over 9 per cent. of GDP in 1975 to an unbelievable 1·5 per cent. in each of the past two years. Nothing in the Budget addresses that fundamental decline in investment.
The Chancellor said much about the merits of public and private sector collaboration. That is a welcome development: we have been pressing for such schemes for many years. However, we need to recognise the valuable contribution that the public sector can make in that field. Sadly, the Government are intent on pursuing their familiar prejudices against all things public.
Business investment is also in a bad way. There should be further capital allowances to bring forward new private sector investment decisions. The Budget should have built on and advanced some of the measures in the previous Budget. The Engineering Employers Federation called for that. I noted the comments of Graham McKenzie, the president of the federation, who said today that he regretted that the Government had wasted an opportunity to improve on the measures in the last Finance Act.
The proposed new measures to help businesses are strictly limited. The proposed enterprise investment scheme and the venture capital trusts will have to be carefully monitored if they are not to become devices for tax evasion. The budgets for key Departments such as Trade and Industry and Employment, contain further evidence of the Budget's contradictions.
According to the Red Book and the other literature that accompanied the Budget, the budget for the Department of Employment is to rise by £145 million next year, and £117 million of that is accounted for by transferring the careers service to the Department. On my figures, that means an increase for the Department of only £28 million, which represents a real-terms cut in the Department's budget for the next financial year of 3 per cent.
How will the new and much-heralded apprenticeship training scheme be financed from that dwindling budget? Have consultations started on implementing it, when will it start, and what will the trainees be paid?
I have a particular interest in that issue because of the collapse of apprentice training in my constituency. The VSEL shipyard used to employ 400 16-year-old apprentice trainees every year to learn vital engineering skills. The shipyard has not done that for nearly three years, and that is a ruinous waste of skills and talent. I hope to have some assurance from the Government that they will start to replace those lost skills. I hope that the Government's proposal is not another bogus trailing of a scheme that will fail to materialise.
If I am right, and the Department of Employment's budget is to fall by 3 per cent. next year while at the same time we are promised 30,000 additional engineering apprentices, where is the money to come from? The scheme needs to be properly supported, and there is no evidence whatever in the Government's documentation that proper financing will be provided.
Many hon. Members have expressed concern about the attack on social provision that is at the heart of the Budget. The hon. Member for Stratford-on-Avon reflected some of the concern among Conservative Members. Some of the Budget measures will have an extremely serious effect on the social fabric of our society.
The hon. Member for Stratford-on-Avon spoke about the reduction in the value of unemployment benefit. People have been paying into a national insurance scheme for many years, and their contributions are soon to rise. It is extraordinary that those people have now been told by a Government who have always prided themselves on their handling of public sector finances, that because they are in such a hole, the pay-out from the scheme is to be halved. That is a betrayal; there is no other word for it.
I understand that nearly £1 billion will be cut from the grant to the Housing Corporation over the next three years. That is bound to have a dramatic impact on the provision of social housing, and it is an appalling and cynical measure. If the Government are able to maintain the delivery of social housing to the extent that they have promised, that cut in grant is at least bound to affect rents, and that is greatly to be regretted.
The taxing of invalidity benefit is incomprehensible. It is an unfair extension of the tax base, and I agree with the hon. Member for Stratford-on-Avon that the Government have not made any credible case for saying that there is irregularity or fraud at the heart of the scheme. That case has never been made.
For years and years, GPs have been applying the regulations that the Government have laid out for access to the invalidity benefit scheme. There is no suggestion, I hope, that local doctors and consultants are somehow conniving in a conspiracy to defraud the taxpayer, which is what, ultimately, the Chancellor of the Exchequer implied yesterday. There is nothing irregular about access to the invalidity benefit scheme; in fact, many of us would argue that the eligibility criteria are far too strict.
The increase of the state retirement age for women to 65 is another significant and serious issue. It is estimated that that will save the Exchequer nearly £5 billion. Perhaps it should have been a priority for the Government to use that £5 billion to improve the range of pension benefits that are


available to our senior citizens, and not to regard the harmonisation of the pension age as an excuse to cut public spending.
An opportunity was wasted on increasing the state retirement age. It would have been far preferable to discuss a more flexible approach to retirement, which would have reduced the age at which there was access to the state pension to 60. It is a mistake, and it will be shown to be so in the years to come.
It has been said—the hon. Member for Newbury (Mr. Rendel) drew attention to it, rightly in my opinion—that the Budget conceals a significant cut in grants of nearly £1 billion to local authorities, which will clearly have an impact on a range of important social services, including education, housing and social services. That is another matter of serious concern, and it should be to Conservative Members.
Today, the Association of Metropolitan Authorities, the Association of District Councils and the Association of County Councils have all predicted serious consequences of that cut in support to local authorities. I shall return to that subject when I discuss the new child care allowance, because it will have an impact on that provision as well.
The Budget also proposes further changes to the student loans scheme. That is a sneaky way for the Government to raise extra financial resources. That too will hang, around the necks of Treasury Ministers in the run-up to the next general election.
I wonder how we can take seriously the Chancellor's assertion that he will not dismantle the welfare state against the background of evidence such as that. Why does he allow the Chief Secretary to continue his tirade against public welfare provision, unless he shares the same basic agenda and is quite prepared for someone else to make the running? There is a particular risk that those wider cuts will also negate the effects of other measures in the Budget.
I now return briefly to the subject of the proposed child care allowance. There must be a worry, because nursery education is a non-statutory provision, that it will bear the brunt of any reduction in local authority spending. There can be little doubt about that. There is no doubt, at the same time, that nursery education, properly planned and properly delivered, can form a coherent part of an overall strategy for child care provision. If there is, as a result of those cuts in local authority grant aid, a reduction in the availability of nursery places in our communities, what then are we supposed to make of that £28-a-week allowance for child care?
I wonder whether anyone has properly advised the Chancellor about the true cost of child care for many families. Of course £28 a week is better than no provision at all, but it will not meet the realistic cost of child care provision for many working parents. If we add that to the possibility of a decline in the number of nursery places, we get a better flavour of the Government's commitment in that area.
In essence, it is once again the sick and those who are£ out of work and on benefit who will ultimately pay the price for the Government's economic mismanagement. Some things never change.
There must also be concern throughout the country—because of the enormous tax hike that those two budgets represent when they are added together—about the combined effect of the last two Budgets on consumer confidence. We are told that, during the next three years,

£23 billion will be taken out of circulation. That is an enormous tax hike£the biggest in British fiscal history. No one can predict its effect on consumer confidence.
My hon. Friend the Member for Dunfermline, East (Mr. Brown) has already starkly drawn attention to the details of those figures. A typical family will be £16 a week worse off as a result. That is bound to have an effect on consumer confidence and consumer spending. If we are talking about growth in the economy, it is difficult to see where else that growth is likely to come from in future.
It certainly will not come from public spending on vital new capital investment projects, because we are witnessing an overall reduction in public spending. That economic growth is not likely to come from an export-led regeneration of British manufacturing, given the problems of the wider European economy. The Government are proposing, therefore, effectively to take £23 billion-worth of consumer spending out of the economy. I would like to hear some assessment from Treasury Ministers of the impact on consumer confidence of such a measure.
While we are discussing export-led growth, it has struck me, and, I am sure, many of my hon. and right hon. Friends on the Opposition Benches, that, throughout the Chancellor's lengthy Budget speech, we did not hear a reference to the trade deficit. We did not hear anything from the Chancellor of the Exchequer about the appalling imbalance of trade that has grown up, not just between Britain and the European Community but between Britain and the rest of the world.
Those are serious economic issues, and the problem with the Budget is that, instead of the serious analysis of them which we were led to believe that the Government would give us, we have had a ritual chanting of mantras that ultimately mean nothing. When we consider the evidence—the experience of 14 years of Conservative government—we are entitled to say that those mantras mean nothing.
Now I shall mention one aspect of the Government's public expenditure round which has not been mentioned so far in the debate—the reduction in defence spending. Once again, I have to say that that issue is of direct relevance to my constituents. In Barrow-in-Furness we have the highest dependency on defence-related contracting of any travel-to-work area in the United Kingdom.
The announcement of a further £800 million-worth of defence cuts was received, and is being received, by my constituents very badly. We have already suffered a loss of 8,000 jobs in the shipyard in less than three years. That is an unsustainable loss of skills and jobs—and employment opportunities—for any single community to expect to deal with on its own. There is no end in sight to that.
We need some information—and we need it quickly —from the Secretary of State about what the Government are now planning in terms of future procurement decisions. I fully support the idea, and the proposal, that the Government should conduct a review of the country's defence policies. That is long overdue.
I am also interested to hear the Secretary of State say, as I understand that he did to the Defence Select Committee today, that the bulk of that £800 million can be saved by means of efficiency measures. If that is the case, why were not those defence cuts proposed before? Are the Government simply saying that they have been overspending in terms of the running costs of that Department to the tune of £800 million? What a scandalous waste of taxpayers' money that would be.
I think that the reality is that there will be significant procurement cuts, especially in the budgets of the armed services. I very much hope that that is not the case, and I hope espėcially that the Government will announce that they still intend to procure replacements for HMS Fearless and HMS Intrepid in the very near future. We need those ships, not just to maintain the ability to deploy the armed forces safely and securely around the world, but to secure vital employment in the shipbuilding industry.
When all the hype and froth is stripped away, the Budget will be seen for what it is—a giant confidence trick. We are all being asked to pay more for less. The fundamental weaknesses of the British economy have not been tackled by this, or any other Tory Budget for the past 14 years. The sick and the unemployed are being hit once more.
Perhaps the right hon. Member for Shropshire, North (Mr. Biffen) had it about right when he commented in the Evening Standard today:
It could be cheers today, but tears tomorrow
for the Tories. I agree with that assessment.

Mr. Richard Spring: I listened with interest to the speech of the hon. Member for Barrow and Furness (Mr. Hutton). He talked about the need to stimulate growth, but the fact is that growth is in revival in the country, and it is in revival because we have a combination of low corporation tax, low inflation and low interest rates. That sets our record apart from those of the other countries of Europe, and the economy is certainly in revival.
I also listened with interest to the speech of the hon. Member for Newbury (Mr. Rendel). Coming from the county of Suffolk, which is now experiencing a combination of the Liberals and Labour in government at a county level, I can see the wish list of goodies very much in evidence.

Mr. David Porter: indicated assent.

Mr. Spring: I see that my hon. Friend agrees with me.
Sometimes, those who are practitioners of economics or politics can lose sight of what economic policy is all about. It is, of course, to provide a framework in which sustained economic growth can lead to decent living standards and secure employment prospects for our people.
As always, every Budget is a balancing act, but this historic Budget has succeeded very well in bringing together all the disparate elements which make up a coherent budgetary package. The result yesterday, for the whole House to see, was the floundering performance of the Leader of the Opposition. I have to say that the hon. Member for Dunfermline, East (Mr. Brown) did not even reach the beach.
The hon. Member for Dagenham (Mr. Gould) summed up the predicament of both the Leader of the Opposition and the Labour party in a press release some months ago:
We have nothing to say across the whole range of macro-economic policy, on exchange rates, on interest rates, fiscal policy, demand management and public spending".
As one looks back at the long history of the House, there can be no time in history when the Government have been

faced with an Opposition more ineffective and economically illiterate. Yesterday and today, they had nothing to say. They know it, and we know it too.
During the summer, I visited Japan and Taiwan with the Employment Select Committee. Japan may have its difficulties, but Taiwan regards itself as in recession with a growth rate of some 6 per cent. Our much-improved export performance is due to the substantial increase in exports to the Pacific rim countries. All that is good for jobs and economic growth.
We have been the major beneficiary of Japanese and other foreign investments in Europe. The effect has been profound. Rover now outsells Mercedes Benz in Europe; Toyota is moving its local content in the United Kingdom from 60 to 80 per cent.; the productivity of the work force in Britain is identical to that of Japan; the days of Friday afternoon cars and Monday morning cars are clearly in the past.
When we visited the Ex-Im bank in Tokyo, which monitors investment flows, it was disappointing to hear that investments from Japan into Europe are very small compared with those to other parts of the globe. Why is that so? Time and again, we heard about the adverse cost structures in Europe and of employment costs that are simply pricing Europe's goods and services out of the world's markets.
There is no point in talking about education, NHS, transport or defence spending if we cannot produce what the world wants. The consequence is that Europe is paying a bitter price. There are 17 million people unemployed in the European Union, potentially rising further in the years to come.
In that gloomy European picture, Britain stands out, with falling unemployment, low inflation and low interest rates. Each and every other EU country has a minimum wage policy— either statutory or collective—and it is no coincidence that, where there is a statutory wage provision in the larger EU countries, there is chronic unemployment, among young people in particular. In France, it is 23 per cent. and rising; in Spain, it is 33 per cent. and also rising. The inflexibility of their labour markets has caused real economic destruction and personal misery.
Britain, like other industrialised countries, has to grapple with a sizeable budget deficit. I am glad that my right hon. and learned Friend has not shied away from it, and I applaud him for tackling it with his characteristic panache. I believe that the unified Budget will be seen to be as important as the Budget of 1979 which brought down confiscatory taxation and abolished foreign exchange controls; and the tough 1981 Budget, which set the scene for a sustained period of economic growth unparalleled since the war.
One reason why the Budget is so important is that it addresses important aspects of welfare spending. It is not a party political issue—nor, indeed, is it confined only to this country. Some 25 million Britons out of 55 million are in receipt of benefit. In each of my surgeries, I try to help people, often with limited resources, because, all too frequently, the system benefits those who do not need it.
The Budget is especially important because it has put down markers for dealing with these problems, while retaining the essential integrity of the welfare state. My right hon. Friend the Secretary of State for Social Security took the matter up so well this afternoon.
I was in my twenties in 1976, when the country went bankrupt. I remember feeling anger that I was going to be


bequeathed a country which had become a byword for industrial anarchy, and the laughing stock of the world. Today, I have children of my own. It would be fundamentally wrong to bequeath them an economy laden down with a debt which would be difficult for them to service and pay off, and we should never be forgiven if we did not rise to the challenge.
The key element of the Budget is the disappearance of the budget deficit by the end of the decade. It is the most critical component of macro-economic policy.
During the boom years of the late 1980s, the vast majority of new jobs came from small businesses. It is important to remember that 96 per cent. of our enterprises in Britain employ 20 people or fewer. I therefore greatly welcome my right hon. and learned Friend's measures to help small businesses.
In rural communities such as my constituency, dozens of businesses exist which are the lifeblood of the west Suffolk economy. Many have been hard hit during the recession, but there are now clear signs of recovery. My right hon. and learned Friend's announcements will be a considerable boost to them. Only yesterday, I was talking to a number of my constituents involved in small businesses, and how pleased they were that they would now no longer have to register for VAT due to the increase in the threshold.
Businesses in that category will no longer suffer the costs and irritation of a statutory audit. Many of my constituents will benefit from a welcome measure for which the Small Business Bureau has been campaigning for many years. We should look carefully at what the attempts will be to cut red tape and help small business.
The audit requirement for small businesses has been significantly relaxed. The requirement will be abolished for most companies with a turnover of below £90,000. For companies with a turnover of between that figure and £350,000, the audit will be replaced with a simplified process which will help some 500,000 businesses, all potentially involved in job creation.
I greatly welcome the immediate lifting of the VAT registration threshold to £45,000. Some 70,000 traders will be able to opt out of VAT—greatly to their benefit. The Budget is of great help to the small business community and therefore to job creation.
There are many reasons why we seem since the war to have been bedevilled by a rollercoaster ride of interest rates. One has been the distortions flowing from our national propensity to put money into bricks and mortar rather than other economic activities. The restriction in mortgage tax relief is welcome, and I personaly hope that, over a period, my right hon. and learned Friend will consider phasing out altogether that distorting relief.
In particular, I applaud my right hon. and learned Friend for initiating the new enterprise investment scheme and a new venture capital trust, and I am personally gratified that any investments potentially will not be property-related. In looking at measures for enterprise, and therefore job creation, the enterprise investment scheme will provide income tax for individual investors of 20 per cent. on up to £100,000 of qualifying investment per year.
Companies will be able to raise up to £1 million per year under the scheme. That is greatly to the advantage of entrepreneurial activity in our country.
The new venture capital trusts will pool savings for investment. That means that investors will receive dividends and capital gains free of tax. That is a useful way

of spreading risk and encouraging entrepreneurial revival and activity, and therefore further job creation. In that context, I greatly welcome my right hon. and learned Friend's efforts to reduce red tape and bureaucracy.
As our public finances get into better balance, I hope that my right hon. and learned Friend will begin to re-examine certain income tax cuts. I hope that in due course he will take more people out of taxation altogether and continue to broaden the 20p tax band. We have seen the fruits of low corporation and income taxes being good for growth and inward investment. However, too many people in Britain are still paying tax too soon—there are too many people in the grey area that overlaps with welfare payments. I urge my right hon. and learned Friend never to lose sight of the benefits of a 20p basic tax rate.
I am glad that my right hon. Friend the Paymaster General is on the Front Bench this evening. In the drama of a Budget, the avalanche of figures and their enormity, the impact of it on distinct groups can be overlooked. Ten days ago, my right hon. Friend the Secretary of State for Employment visited my constituency, notably Newmarket, the racing capital of the world.
The racing industry generates considerable employment in my constituency. The industry had been in catastrophic decline. However, as a result of the spring Budget, the number of owners coming back to the industry has started substantially to increase, and the number of horses in training has increased as well.
There has been a quantum leap in confidence in Newmarket in the western part of my constituency. We are now seeking to upgrade the quality of training for young people in the industry. With the benefit of hindsight, nine months on I express the gratitude of my constituents to my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) and my right hon. Friend the Paymaster General for effecting those changes, which have dramatically changed the fortunes of many of my constituents.
Yesterday's Budget will put the seal on the recovery that is now in place—a recovery that will ensure in due course that we will win the next general election. The winter of recession is now over—or, to use an expression that I learned at an early age:
If winter comes, can spring be far behind?

Mrs. Audrey Wise: I want to consider the interaction between health and the Budget. In particular, I want to look at the direct damage that is caused to people's health by the Government's deliberate actions. Earlier the Secretary of State for Social Security bewailed the doubling of the number of people on sickness benefit and invalidity benefit since 1979. He said that that had happened although "the nation is getting healthier". Clearly he accuses a large number of people of malingering.
The Secretary of State's answer is to look for devices to disallow benefits and claims. Not only does he think that people are malingering—apparently he thinks that doctors are conniving at it. On the contrary, the number of people on sickness benefit reflects a real increase in illness. The nation cannot be said to be getting healthier when the number of people claiming sickness benefit has doubled in 14 years. Certainly the nation is getting more polarised so that the rich and the fortunate become even more rich and fortunate, and the poor get poorer.
Fourteen years of Tory government are making people sick in the literal as well as the metaphorical sense. But what if the Secretary of State were right? Why does he not ask himself why 14 years of Tory government should produce a nation of malingerers? Surely there is something wrong with that as well. Why were people not so sick or so given to malingering in 1979 as they are after 14 years of Tory government? Could it possibly have something to do with bad housing, a lack of jobs, insecurity and casualisation of work, more money worries and more stress, and a culture of cruelty deliberately induced by the Government which encourages the weak and the vulnerable to be pushed to one side and enshrines greed and selfishness? Could that have produced the situation that the Secretary of State bewails?
Government supporters sometimes say that the national health service is a sort of bottomless bucket which will require limitless resources. That will be true if we continue to have a Government who damage people's health with their savage social policies. Bad housing is a major cause of bad health, especially respiratory diseases which are increasing, stress-related illnesses and mental breakdowns. In Preston, I see many children suffering directly from inadequate housing. I see many babies and toddlers who never seem to have been properly well.
What is the Chancellor's response to the housing crisis? He has looked at housing as an area in which to make what he calls savings. He has even cut the resources that go to his chosen instrument, the housing associations. Housing associations were supposed to be able to provide social housing so much better than local authorities. The Chancellor cut local authority housing, and he has now cut resources for housing associations. He says that that will produce savings. However, it is the most crass and cruel false economy. The cut in housing finance epitomises the Budget. We will need to continue spending more on picking up the casualties which the Government have created.
What are the Government doing to the national health service? With a twin-track strategy, they are creating a situation in which there is no boundary between the public health sector and the private health sector. We have gone far beyond the simple contracting out of health jobs. Public money is being used to buy treatment in private hospitals, and people are driven to private insurance to get treatment in public hospitals. In both those cases, public health suffers, and public facilities are abused by the process. I regard it as contrary to the philosophy of the national health service.
On the one hand, the Government are making people more ill by making their social conditions worse and, on the other hand, they are making it harder for people to get the treatment that they need when inevitably they become casualties. When the Government look at the number of people who are claiming benefits and the doctors who are signing the sick claims, they say, "There are too many of them." They ask not how they will correct the situation, but how they will push people to one side. What new scrap heap will be created for those people to inhabit?
The Budget, for which we are all supposed to be so grateful, is a disgrace. In 1993, it is a disgrace that the biggest boast of the Government who have been in power for 14 years is that they have not increased taxes on food

or children's clothes. Their claim to fame is that we were all trembling that they might tax books, clothes or food. We are supposed to be overcome with gratitude that those things have not happened and that families' conditions will not be worsened in that way. I noticed today that one tabloid even spoke of "Santa Clarke". Santa Claus's mantle sits ill on the figure of the Chancellor of the Exchequer.

Mr. Tony Banks: He has the girth.

Mrs. Wise: Yes, he has the girth, but no other attribute.
It is a redefinition of "gratitude" to suggest that we. should be grateful for the Budget. I am amazed that pensioners are supposed to be overcome with glee that they will be given back half the loaf that is being stolen from them through the imposition of VAT on fuel. People will not be overcome with glee. They can recognise when they are being robbed, even if the thief gives back to them some of the proceeds. Their gratitude will be distinctly limited.
Although I despair of the problems that the Budget will continue to cause people, the only silver lining or hope that I can derive from it is that it will further expose the hollowness of the Government's claim to have a right to govern the country.

Mrs. Angela Knight: The hon. Member for Preston (Mrs. Wise) obviously feels strongly about her constituency. She advocated spending but did not say how she would raise the money. I disagreed strongly with her remarks about the health service, which is doing an excellent job. Her description sounded like the decay that existed in the 1970s rather than the vibrant country that we have now.
I welcome the Budget. It is tough but fair and it shows a genuine commitment to the welfare state. I listened with interest to the wholly negative speech of the hon. Member for Dunfermline, East (Mr. Brown). Opposition Members are evidently not prepared to take tough decisions. The sum total of their policies can be described as a decision to defer a decision, in a Micawber-like hope that something will turn up, and a policy to hunt for the phantom loophole. It would be pleasant if difficult choices never had to be made. It would be pleasant if the sun shone all day and it rained at night. But that is the stuff that fairy tales are made of, and this is reality.
My right hon. Friend the Chief Secretary reminded the House that sound finance was the Budget's underlying theme, and the continuing recovery is already helping to reduce the deficit. But I welcome his decision to tackle expenditure and the deficit so positively. If left unchecked, they would result in an increasing debt burden in future years for the next generation to pay. I believe in passing on to the next generation not liabilities but sound finances and a strong economy.
The hon. Member for Barrow and Furness (Mr. Hutton) said that the combination of this Budget and the last one was detrimental and would affect confidence. I remind him that the United Kingdom is the only European country with falling unemployment and rising output. We are moving steadily out of recession, unlike our European partners. A recent survey of 1,000 companies in the east midlands, published at the beginning of this month, showed that more


than two thirds were expecting sales to increase, and strong signs were reported of improving trends in employment, profitability and confidence.
In the past few days I received a letter from the managing director of a company, Guy Birkin, in my constituency, which is the oldest registered lace company in the world. He wrote:
During the last five years the company has more than doubled in size; a strong sales drive into Europe has been highly successful … A major investment programme has been undertaken with over £20m spent on the latest technology … The push forward by the company has been supported by a very flexible and enthusiastic staff … All this has led to international recognition of the company, increased employment, improved opportunities and working conditions for our employees, a good return for our investors, and increased business for the companies who supply us with goods and services.
That is one of many examples of a highly competitive British company that is succeeding in world markets. It is prospering because of low interest rates, low inflation and the economic conditions in this country.
The Budget will be judged not just by the specific measures that it contains, or by the instant comment that has resulted, but by the contribution that it makes to keeping the economy moving out of recession, reducing unemployment, which is still too high, and reducing the deficit.
The Budget is a strategy for long-term growth and it helps business, jobs and recovery in a number of ways that are widely supported by the business community. In my constituency of Erewash, nearly 45 per cent. of the work force is employed in industry, which outstrips the average for the country, the east midlands and the county of Derbyshire. The measures relating to industry are therefore particularly relevant to my constituency. After all, it is industry which creates wealth and jobs. Big companies are the engine of the economy and small companies are the spark plugs. Some 35 per cent. of all jobs are in small companies, and growth in employment coms from them.
The past two Budgets have held the increase in business rates to the rate of inflation, which has been widely supported by business in my constituency. This year, the maximum increase in business rates will be halved and my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) referred to some of the benefits of that. Coupled with that are the changes to corporation tax. These measures will assist successful companies that are contributing to the growth of the economy.
The reduction in audit requirements has been mentioned. Small companies have wanted such a measure for some time. Audit requirements have often been out of proportion with the size and profit of the business and there is a heart-felt welcome for this deregulation.
Raising the VAT threshold benefits sole traders in particular and will drop many out of the VAT requirement altogether. But late payment of debt is a significant problem that adversely affects small companies and I have had most complaints about this problem. It has often been highlighted in the House and, in his speech yesterday, my right hon. and learned Friend the Chancellor proposed two options: either a payment performance standard or a statutory right of interest. I urge the latter course, with responsibility to a high level in the company, and continuing measures to strengthen the small claims court.
Finance for small companies is yet another continuing problem. Although I appreciate that the banks have been looking more favourably at ways of financing small

businesses, based on their prospects and business plans rather than simply on the amount of collateral that the owner can put up, it is still common for a small company to operate with its cash flow financed by an overdraft and its expansion by a second mortgage on the home. That is not a long-term way for small businesses to operate.
I therefore welcome the venture capital trust and the enterprise investment scheme proposals. I trust that attention will be paid to detail, to ensure that small businesses, which often seek modest loans, are helped by these two proposals.
Assistance to business and the need for good infrastructure go hand in hand. The public-private sector partnership that the Treasury is promoting will bring forward schemes that otherwise might not have been introduced so quickly. It was extraordinary that Opposition Members appeared to shrug off the proposals when the Chief Secretary mentioned them today.
Many of my hon. Friends were delighted yesterday at the announcement of the improvement to the west coast line and I look forward to the day when my right hon. and learned Friend can announce a partnership that will bring about the electrification of the midland main line, which is another important railway link that connects the manufacturing heartlands of Leicester, Nottingham, Derby and Sheffield. Like other hon. Members, I have a further list of projects which I look forward to seeing come to fruition as a consequence of that partnership.
Let me turn to some of the other issues in the Budget and to the concerns that have been expressed about the continuing rise in the social security budget and the need to control it. Currently that budget is spending £13 per person for every working day, which is an extraordinary amount.
There is clearly a pressing requirement to prevent fraud and to spend where spending is necessary, but not indiscriminately. Realistic changes have to be made to ensure that we have a system that is affordable, that helps people to find work, and that properly helps people in need.
I join with my hon. Friends in welcoming the measures to assist those on low incomes and pensions in paying the increases in their bills when VAT is added to domestic heating. I am surprised that those proposals have not been welcomed by the Opposition.
A few days ago the Opposition's social security spokesman said that the Government must add some something to pensions to take account of VAT, and that they should add an extra 50p to pensions. Not only have the Government proposed an extra 50p; they have proposed more for future years. It is an excellent measure.
The hon. Member for Newbury (Mr. Rendel) poured scorn on the proposal to put VAT on fuel and power, but the Liberal Democrats' document entitled "Costing the Earth", advocated as a first priority the imposition of a tax on energy. It continued:
for example, by ending the anomalous zero rate of VAT on fuel.
It is strange that the hon. Member for Newbury did not comment on that tonight.
The Government believe in helping those on low incomes and pensioners. I welcome their proposals.
The addition to social security will be of considerable assistance. Gas and electricity prices have been falling—down by 3·5 per cent. in the east midlands this year—and that will also have an important impact.
I expect that the granny bond will have a widespread appeal. I also welcome the extension of the home energy efficiency scheme, particularly to pensioners. It is a low profile scheme, somewhat unsung, bat it gives grants to insulate homes, which results in lower fuel bills. This Friday, I am helping to publicise the scheme by helping a pensioner in my constituency who has received a grant and is insulating the property accordingly.

Mr. Tony Banks: I see a press release coming on.

Madam Deputy Speaker (Dame Janet Fookes): Order. I am getting a little tired of seated interventions. The rule of the House is quite clear: if Members wish to intervene, they must seek to do so. Muttered commentaries are not acceptable.

Mrs. Knight: Yesterday my right hon. and learned Friend the Chancellor of the Exchequer ann0ounced that the pension age for men and women will be equalised at 65 by the year 2020, but that it would affect only women under the age of 44. Further details were given by my right hon. Friend the Secretary of State for Social Security this afternoon. I must declare an interest in this matter because I am not yet 44. I suspect that I am one of an exceedingly small minority of hon. Members who will be affected by this measure.
The demographic changes in the country are well known, and by the year 2020 there will be many more people than now who are over retirement age, and far fewer of employment age. If no change is made, the financial burden on those in work would substantially increase. Just as I believe that it is not right to pass on a deficit to the next generation, so it is not right to pass on a heavy financial burden to my children.
The measure will have a long phasing-in period—and rightly so—and changes are proposed to the state pension scheme which will particularly help women. I hope that further attention will be paid to occupational pensions, particularly for women, who go in and out of work more regularly than men as a consequence of their family commitments. Occupational pensions provide not only additional financial security but give individuals a flexible choice of when to retire.
The announcement on the retirement age reflects the changes in our society. More women now choose to work, and with the encouragement given by the child care proposal in the Budget, even more women will come into the work force.
The Budget has put the Government's finances on a sound footing and clearly helps both businesses and jobs. It decisively tackles head on the difficult economic problems that must be solved in order to ensure a long-lasting recovery.

Mrs. Helen Jackson: As the Chancellor was making his speech yesterday, I was looking for two things in the Budget. First, I was looking for a commitment to help the major manufacturing plants in my constituency to maintain employment in the steel industry. Secondly, I was looking to see exactly how the Government were going to translate their oft-quoted phrase "traditional family values" into the preparation and presentation of their Budget.
I came straight to the debate from a meeting with the Sheffield branch of the Engineering Employers Federation, where, as a South Yorkshire Member of Parliament, I heard a very worrying description from the major employers in our region about the extreme fragility of the recovery in their economic fortunes, if any.
When I talk about the steel industry, I am not talking about a frothy, "easy come, easy go" manufacturing sector, but about a core industry of special steel manufacture. The representatives were complaining about their competitiveness with other European steel industries. They said that they were at a disadvantage—that there was an uneven playing field—because they had evidence that other European Governments were giving their steel industries incentives and assistance in the form of help for capital investment, for environmental issues, for training, for easy finance and for land deals.
It is more sensible for us to say to our Government, "It is not fair that you are not helping our basic industry to compete in a very competitive world," than to say to a European Community country, "It is not fair that you are helping your basic industries to compete."
One issue that members of that federation feared, when the Chancellor presented his Budget, was that they would have to carry extra costs such as sick pay. So I was very disappointed that sick pay was included as an extra cost for these core industries. That is not to say that the federation does not welcome many of the incentives and issues that the Budget gives for small business investment and expansion, but we cannot use that expansion to invest in a basic steel industry, as that does not come within the scope of a small business. Some 75 per cent. of the Sheffield engineering employers would be outwith that kind of help.
While I fully support many of the proposals to assist small businesses, I have a nagging worry, which the Government should address urgently. They make great play of having closed a couple of tax avoidance loopholes, but I fear that in doing so they may have opened the door to 22 more. I believe that they have done that in a range of ways, when relaxing requirements for accounting and auditing procedures in smaller unquoted companies.
I was particularly interested to learn how the Government intended to translate their oft-quoted insistence on traditional family values into the Budget. Over the past few weeks, I have observed an underlying assumption every time that phrase has been used—the assumption that such values include a substantial amount of unpaid work on the part of women at home. When the phrase "traditional family values" is linked with the phrase "back to basics", there is a specific reference to the role of women 40 years ago.
The hon. Member for Erewash (Mrs. Knight) mentioned one obvious implication of the Budget in that regard: the equalisation of pension ages at 65. It should be admitted that the £5 billion that that will save is £5 billion taken out of women's benefit. That will not be very popular among women of 40, 44 or, indeed, any other age, who will lose their entitlement to many other benefits at the age of 60, as well as their pensions.
I should have preferred the Government to make really significant strides by extending equalisation of pension entitlement to part-timers and short-term contract workers. That is crucial to giving women real equality with men when they reach retirement age. At present, female pensioners are substantially less well-off than men in terms of income.
I welcome the Government's admission in the Budget that it is very difficult for a single parent to become involved in the job market without easier access to child care. The provision of a child care allowance for single parents was certainly a start. However, another oft-quoted phrase was fundamental to traditional family values in the context of the Budget—the Government's frequently stated intention of moving from a system in which income is taxed to one in which spending is taxed.
I believe that the real burden of the Budget will be experienced sharply at the household spending level. Who takes the responsibility for such spending? The figures are interesting. In households in which the men work, who does the household shopping? Four per cent. of men do it; in 42 per cent., it is done mainly by the women. In households in which women are not in paid work, the shopping is done by 57 per cent. of women and only 5 per cent. of men. In households as a whole, only 8 per cent. of the men do most of the household shopping, which is done by 45 per cent. of the women.
The role of women, however, is not simply to go out with the shopping basket. Who organises the household money and bills? That is a more significant question. Again, it is mainly women who take on the responsibility: in 45 per cent. of households, they are chiefly responsible for such organisation. The effects of the Budget will be felt most markedly in that regard. The imposition of VAT on heating bills, for instance, will affect a central aspect of household budgeting.
Although welcome help has been given to households receiving income support, the Government should not imagine that that will be sufficient, given that the imposition of an 8 per cent. and then a 15 per cent. levy on heating—a crucial household commodity—will be felt next year and the year after. They will have to think again, as the spending power of households is increasingly eaten away.
Insurance of homes and household goods represents another crucial spending element, especially—as has been pointed out—during the current period of rising crime. The cut in Housing Corporation grant will result not only in fewer houses being built for rent, but, inevitably, in substantial rent increases, which will have a major effect on household bills. Those moves follow other increases —for instance, the 26 per cent. increase in water costs over and above inflation since privatisation in 1985, and the extra cost of car licences and insurance.
Yesterday, the Chancellor said:
people should be allowed to keep as much of their own money as possible."—[Official Report, 30 November 1993; Vol. 233, c. 936.].
That, it seems, is the reason for shifting the burden of taxation from income to spending. I do not believe that households with tight budgets will have the freedom to spend their own money in the way they want; the basic household bills will have removed all their spending power.
In the past few weeks, we have heard a good deal about another element of "traditional family values"; the importance of the head of the family in spending terms —usually the woman—in taking in single parents or students back home. Increasingly, they are young people studying at university, who have been caught by the massive cuts imposed on students in yesterday's Budget.

The cuts in maintenance grants may not affect the numbers, but they will certainly change the type of student who can enter higher education.
There has been a shift in class structure among university students. It is very difficult for young people —and even more difficult for mature students—to go into higher education at a time when grants are being cut, and local authorities are being squeezed so that discretionary grants are almost a thing of the past.
In describing the reason for the cuts in student grants, the Chancellor of the Exchequer said yesterday:
Why should the bus driver …pay higher taxes to finance all the living costs of tomorrow's lawyers?"—[Official Report, 30 November 1993; Vol. 233, c. 929.]
Why should not today's lawyers, and for that matter, today's trust managers and quango directors, pay through income tax to finance, help and invest in the skills of tomorrow's generation?
As well as the extra burdens on the household budget, we heard in the Secretary of State for Social Security's statement that the shift is not merely from taxing income to taxing spending. It was a remarkable effort in combining hefty increases in tax and spending with hefty increases in taxing income.
There is no doubt that taking £10 billion out of total public spending over the next three years will have a disastrous effect on many areas of our quality of life. The opening remarks of the Secretary of State, in which he placed great emphasis on targeting welfare benefits, were interesting. He mentioned that hon. Members such as himself would be concerned with
those for whom the welfare state was designed
I am not as young as the hon. Member for Erewash, but I have always believed that the welfare state was designed for every one of us who may want to use the library or who may want to send our children to state school, who may want to use the state health service, or who is concerned about the cleanliness of the environment.
As soon as the welfare state becomes something that is available to that mythical "those", who are not all of us, it will decline in quality and will not operate in the best interests of all the British people. That is a central element of the irresponsibility with which the Government approach the whole issue of public finance for the future welfare of us all.
The Budget did nothing for jobs and manufacturing in my constituency, and it points to the worrying way in which the Government intends to serve the British people, in whose interests they were supposed to design the Budget.

Mr. Bernard Jenkin: I feel sorry that the hon. Member for Sheffield, Hillsborough (Mrs. Jackson) does not feel that the Budget will do anything to improve manufacturing in her constituency. I may follow up those comments later.
The hon. Lady also mentioned family values. Anybody who starts to talk about family values should be heard because we need more of a consensus in the House about what family values should be and how we should sustain them. But it is a little churlish to lead family values against VAT on fuel after the announcement of such an incredibly generous package of measures that is certain to protect poor families, not only because of the special measures that


will be announced, but because all possible commodity price rises are already reflected in the retail prices index. That index affects the annual uprating of all social benefits.
The hon. Lady also mentioned the impact on higher education of reducing student grants and converting them to loans. There is no evidence whatever that since the Government have introduced loans, people have been discouraged from entering higher education. On the contrary, we are ahead of the Government's target of getting more people into higher education. We hope to get one in three into higher education by the end of the century and we shall easily beat that target.
Speaking as an hon. Member who represents a university constituency, I realise that our system requires more generous provision for student maintenance, whether through parents, state grants or loans. It is more expensive for the average British student to attend university because the average student lives away from home. That is not the norm in most other European countries and often not the norm in the United States, but the introduction of loans has not discouraged people from taking on the liability of higher education because they know that it will improve their earning power in the long term.
I declare an interest in the debate as an adviser to the Legal and General Group plc and congratulate my right hon. and learned Friend on the presentation of the Budget. I choose to call it the hush puppy Budget—not that the hush puppies and the softness of their step should deceive us of the weight and stature of the man that fills the shoes, or conceal the heaviness of the task that he has borne or the toughness of the decisions that he has had to make. I wish to comment on two general areas: the steps that the Government appear to be taking towards a comprehensive reform of our welfare system and the lessons that we can draw from the extraordinarily successful anti-inflation policy pursued by the Government that has created excellent prospects for the United Kingdom economy.
There are several aspects of the Budget that I have always considered most important for Britain's economic health. I am delighted with my right hon. and learned Friend's plans to eliminate the PSBR by the end of the decade. That is the dividing line between the Conservative party and the Opposition parties. There has been absolutely no evidence in any of the debates from either the Opposition Front Benches or Back Benches that there is any strategy whatever to deal with the deficit.
It is no good merely throwing around false charges about election pledges. I am perfectly happy to stand by any pledges that I made about the Conservative party being a party of low taxation. Compared with any of the Opposition parties, that is certain. It is rich of those on the Opposition Front Bench to pretend that somehow they will not raise taxes as high as the Conservative party.
Even better in the short term is the Government's plan to end borrowing for current spending, which is wholly unproductive and merely robbing tomorrow to pay for today.
Contrary to the out-dated fears of the few remaining monetarist commentators, those steps will provide a powerful boost to the economy that will increase employment and create wealth. From the rises in the gilt market and the stock market we have already seen that the financial markets have every confidence in that statement.

The Government have successfully demonstrated their determination to manage their finances prudently and live within their means.
We should pay tribute to the tough decisions made in the March Budget because they laid the foundations for yesterday's announcements and my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) should not be forgotten or dismissed for his role. However, the March Budget left a question mark over the determination to deal with the deficit—one with which I am sure that my right hon. Friend the Member for Kingston upon Thames would have dealt.
The figures were serious. I refer briefly to a written answer given by the former Chancellor to a question tabled by my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) in which the projected out turn of the national debt as a proportion of gross domestic product was described. The answer said:
This ratio fell from 49½ per cent. at the end of 1978–79"—
when we were first elected—
to 27¼ per cent. at end 1990–91, but has since risen to an estimated 33½ per cent. at end 1992–93. The PSBR projections in table 1 of 'The Budget in Brief' imply a ratio of 49¾ per cent. at end 1997–98."—[Official Report, 29 March 1993; Vol. 222, c. 17.]
That was an indebtedness in excess of what we had inherited from the last Labour Government. It was clearly unacceptable. That Budget was clearly an interim arrangement, pending strengthening economic performance, before my right hon. and learned Friend the new Chancellor had a chance to put his stamp on the proceedings.
We now have a much improved scenario. The consequence of mounting up less debt is much less debt interest. It is a virtuous circle. The less debt, the less debt interest and the lower the public sector borrowing that ensues the following year. So we have reduced debt interest by a billion and more in all the forward years.
Conservative Governments are nothing if they cannot live within their means. Amid all the manifesto pledges that we made at the last general election, one of the most pre-eminent surely was and remains that we should see the budget return towards balance as the economy recovererd. I am extremely pleased to see that the manifesto pledge will be fulfilled. No matter how many manifestos the Labour party signs up to, it is business that creates wealth while Governments' efforts to redistribute wealth tend to undermine the wealth-creating process.
I welcome the tight cap kept on public spending. My right hon. and learned Friend is to modest when he talks of
a real terms freeze in the new control total over the next two years".—[Official Report, 30 November 1993; Vol. 233, c. 924.]
By insisting that next year's reserve should not be sprinkled around the various Departments, the Government have ensured that the control total for 1994–95 represents a real terms reduction against the expected outturn for the current year. Over the summer, while Parliament was in recess, a few of us put ourselves into the line of fire by insisting that that would be possible. We gained much criticism from the "Today" programme and the Labour party and all the other people who said that it would not be possible. I am extremely pleased that it has been possible without inflicting great pain on our public services.
Simply because we are in a less inflationary environment, it is easier to manage the public finances, and


it is right that the Government should seek to take advantage of lower than expected inflation by lessening the burden of public expenditure. The control totals in the March Budget were already tight, but the futher reductions are entirely reasonable, given that inflation and public sector wage costs have turned out lower than expected.
The Government still take too great a share of national income. Those countries in which public spending is a lower proportion of national income are best placed for economic recovery. We ought to take more active steps to reduce our public spending. The public sector pay freeze is a good start. I welcome the comments made by my right hon. Friend the Chief Secretary today about the administrative cash limits that have been put on Government Departments.
There are plenty of instances in the folklore of Whitehall and Westminster of vast waste and extraordinary Byzantine practices around the corridors of power. One special adviser—a little while ago, I have to say—working in the Department that one would imagine would be the most cost-conscious of all Departments, the Treasury, told me that, if he was preparing a document, it first had to be sent down to the typing pool. If it was sent back, he could make up to seven corrections on his computer on his desk. If it needed more than seven corrections, he was required by civil service rules to send it back to the typing pool to have the corrections made.
I know a similar story from the Department of the Environment. A trainee was sent off to do some jobs which included some photocopying. She asked where the photocopier was. The reply came, "Oh no, you don't do the photocopying. That goes down to the fourth floor. Len does the photocopying." She asked when she would get her work back. She was told that Len was on holiday and would not be back for two days. I can give chapter and verse on a personal basis, but perhaps I should do so off the record. I am sure that the competitive testing programme is designed to take heed of such practices.
Perhaps some of the best news in the Budget is what did not happen. Income tax rates did not rise. While we see the benefits to the Conservative party of a 20 per cent. basic rate of income tax—increased incentives to work hard and encouragement for those with the lowest earnings—we are right to increase national insurance contributions to fund the deficiency grant of the national insurance fund.
Another move that was clearly needed was the first step towards abolishing the remnants of mortgage interest tax relief. That will remove a distortion in the economy, which was ably described by my hon. Friend the Member for Bury St. Edmunds (Mr. Spring), and help prevent another property-based boom like the one in the late 1980s. People will be less encouraged to invest in non-wealth-creating residential property and more encouraged to invest in productive assets.
Furthermore, by effectively raising the cost of money to domestic borrowers, we make it easier for reductions in the base rate to take place, which benefits industry as a whole. We must still encourage home ownership and make it easier for young couples to buy their first home by means of first-time reliefs. But we do not need to subsidise the rest of the economy. With interest rates at a 16-year low, the typical mortgage payer is some £170 better off already. Now is clearly the time to start the long-needed abolition.
As secretary of the Conservative Back-Bench smaller businesses committee, I welcome the measures to help

small businesses. Along with the forthcoming deregulation, simplifying the paperwork that the Government require is a great step forward. Not only will taxation forms be simplified, but some 45,000 businesses will be freed from VAT. Many more will no longer be subject to audits. All those measures will allow small and medium-sized businesses to get on with making money rather than enriching accountants.
I particularly welcome the ideas to tackle late payment of small company debts. We look forward to the development of those ideas. Also welcome are the measures to encourage investment in small businesses. The new enterprise investment scheme and venture capital trusts will bring in capital. Allowing angels to take paid directorships will bring in valuable expertise.
While the changes to capital gains tax are welcome, I believe that the Government are missing a trick here. We successfully raise far more revenue from top-rate taxpayers by abolishing special reliefs and cutting the rate from the previously punitive levels. Yet we have set CGT at a relatively punitive level. We find ourselves compelled to introduce an ever-evolving set of special reliefs to ameliorate its damaging effects. There is a better way.
If the Laffer curve, as it has become known, applies to income tax rates, why does it not apply to capital gains tax rates? Two interesting papers have been produced on capital gains tax, which I recommend to interested Members. One is by the Centre for Policy Studies and the other by the Adam Smith Institute. I shall precis the latter document.
The United Kingdom rate of capital gains tax is 40 per cent., although it is adjusted for indexation. It is among the highest in the world. It is far beyond the point of maximum revenue yield. Several academic studies in the United States provide empirical support for the argument that the present 28 per cent. rate of capital gains tax is above the maximum revenue rate. Estimates of the latter vary from 9 to 21 per cent., with 15 per cent. the mid-point of the range.
There is no reason to believe that the revenue maximising rate of capital gains tax is higher in the United Kingdom than in the United States. There is good reason to believe that it may even be lower. The revenue maximising rate of capital gains tax is not necessarily the optimum rate, in that the maximum revenue-raising rate would be damaging to the infrastructure of the economy.
The taxpayer loses from the current system of capital gains tax. The available evidence suggests that the revenue maximising rate of CGT in the United Kingdom is possibly about 15 per cent. Further benefits could be realised if the tax rate were reduced below 10 per cent., and ultimately to zero, as in many other countries, such as Hong Kong.
In the current period of fiscal stringency, I do not recommend abolition, but a substantial cut in the current 40 per cent. rate would release assets, currently imprisoned by the 40 per cent. rate, for more productive uses, there would be a substantial increase in capital gains tax revenue for the Treasury to go towards reducing the PSBR further, and it would substantially improve general business incentives without resorting to the expensive profession-subsidising mechanisms that have been announced in the Budget, welcome as they are.
I particularly welcome the measures to protect those on low incomes from the imposition of VAT on domestic fuel. The Conservative party has made clear its commitment to preserve a functioning welfare state and to helping those in


need, which the package does. It will benefit 15 million people—one fourth of the population—and we are starting the relief measures before the taxes kick in.
One measure of particular merit is the pensioners income bond, which will provide a guaranteed monthly income, alowing those on fixed incomes to plan their budgets more easily—those reliant on their savings.
I shall now deal with social security. As well as the comprehensive VAT compensation package, there are other items such as the reform of invalidity benefit—the introduction of incapacity benefit, changes to statutory sickness pay, the reform of unemployment benefit, the introduction of the job seeker's allowance and equalisation of the state pension age.
All those measures are part of a clear programme that the Government are developing to improve work incentives and reduce reliance on the state. I shall talk in detail about the job seeker's allowance, which is intended to be, and will be, a single, simple and comprehensive benefit for unemployed people. It will require that the recipient completes a job seeker's agreement, which will set about the conditions to be fulfilled to receive benefits. People who do not look for work will be penalised. That is better than workfare, because it encourages people to find a productive job rather than be stucck in a non-productive job.
There is a strong case for change. At the moment, there are two benefits: unemployment benefit and income support. They do not fit will together and there are inconsistencies between them. The two benefits have different rules, offices and systems. It is too easy for people who are not genuinely looking for work to claim for an indefinite period.
Under the current system, there is no effective penalty for people on unemployment benefit who fail to participate in training schemes. Under the job seeker's allowance, income support will remain unchanged for pensioners, carers and their families. Benefit will be paid weekly with two possible routes of entry: the contributory route or the means-tested route. The new benefit simplifies procedure and will reduce fraud by targeting the help on those who are genuinely seeking a job. The vast majority of my constituents will be delighted that there will be less shirking under the arrangement.
I mentioned that that is part of an ongoing plan for reform. I would point out that two of the proposals that appeared yesterday in the Budget: equalisation of the state pension aged at 65 and the reform of unemployment benefit, are broadly explored in a pamphlet that a group of us published over the summer.
I do not take any personal credit for the proposals that were introduced. If the Labour party is honest, it knows that its so-called social justice commission is forced very much to the same conclusions and to explore the same arguments. It is difficult. Anybody studying the problems that we face on the ever-growing burden of social security, is forced to the same conclusions that we have been forced to draw.

Mr. Barry Legg: My hon. Friend does not do himself justice when he refers to the publication that he has before him. Out of the measures that are advocated in it, four were introduced: the equalisation of the retirement age; reforms to the earnings

related element of invalidity benefit; the fact that the new benefit that will be introduced in respect of invalidity benefit; and also the new job seeker's scheme, which will be available for six months.
My hon. Friend should also note the support that the Prime Minister gave to another—

Mr. Deputy Speaker: Order. The hon. Gentleman is, I believe, seeking to catch my eye, but he seems to be making a speech rather than a short intervention.

Mr. Jenkin: I am grateful to my hon. Friend for his intervention, as he makes a valuable point about the influence that we may have had, but I do not claim to have been that influence. Those are natural conclusions to be drawn from the arguments once one explores them.
Another point that I wish to emphasise to the Opposition is one made by Beveridge in his original report. We quote it in our document. He said:
The danger of providing benefits, which are both adequate in amount and indefinite in duration … [is] …that men as creatures who adapt to circumstances may settle down to them.
That is something to which the welfare state that we have inherited today does not pay sufficient heed. No doubt Labour's Social Justice Commission will have to grapple with that as well.
I shall now move to the second area that I wish to cover to say a few words about our economic prospects with particular regard to the Government's outstanding inflation record. The anti-inflation policies have been remarkably successful in view of the shocks and dislocation to public policy just a short time ago, particularly after the devaluation of sterling, which many commentators—the Treasury, the CBI and the Bank of England—said would lead to higher inflation than has been produced. Last March the Red Book showed a reduction in the forecast that was previously forecast. This week's Red Book shows a further reduction.
Since the pound left the exchange rate mechanism, we have proved; first, that we can have lower interest rates than the Germans—we are not necessarily inexorably tied to them; secondly, that a substantial depreciation in the rate of sterling does not necessarily lead to uncontrollable inflationary pressures; thirdly, that the exchange rate is far more useful as an indicator than as a target. I am pleased to say that the Red Book uses the exchange rate as an indicator and not as a target.
The success of our policy since we left the ERM and the prospects outlined in the Red Book—startlingly high growth prospects rising to a steady 3 per cent. annual growth in GDP—represent the coming of a new golden era, perhaps a second "golden age" for the Conservatives. I shall draw attention to one or two ratios and indicators, which are woefully ignored by hon. Members on the Opposition Front Bench.
Central Government fixed investment is far higher now and will remain far higher than ever it was in the 1970s. Let us look at unit labour costs and manufacturing. Unit labour costs have fallen recently, making us more competitive. All the indications on cost competitiveness show that we are gaining competitiveness at the current time, which leads me finally to a brief comment about monetary policy.
We have succeeded in re-establishing a more orthodox monetarist policy that enables such success to take place. Some commentators have been consistently monetarist and I shall draw the attention of the House to one in particular. Tim Congdon wrote on 26 September 1985:


It would be particularly foolish to reject the PSBR and sterling M3 because the figures have generated problems of interpretation. Sterling M3 cannot be 'meaningless'. It consists of bank deposits and notes and coin, and no one in his right mind can believe that their holdings of these assets do not affect the behaviour of individuals, companies and financial institutions.
On 17 October 1985, he wrote in The Times an article that described how sterling M3 growth accelerated rapidly in the preceding six months. In The Times of 22 November 1985, he was warning that the EMS was no easy option. By 27 June 1987, he was writing in The Spectator:
Much has gone wrong with the management of the British economy in the last two years. The growth of credit and money is too high, the economy is expanding too quickly and interest rates are too low to prevent the return of inflationary pressures.
If only the Conservatives then had heeded those warnings, we might not have had such a serious recession to contend with, and certainly not such serious inflation.
What is perhaps more interesting is what Professor Congdon is saying now. He was reported in The Daily Telegraph on Friday 26 November as saying:
We'll be clearly into a proper recovery next year, and we can then look forward to several years of above-trend growth without inflation. There is a real possibility that the underlying growth rate has improved.
In his November review, he recommended:
There is no doubt that public sector borrowing is unsustainably high and that measures must be taken to reduce it … large and early tax increases to reduce the PSBR, accompanied by an offsetting relaxation in monetary policy
That was his prescription. That is what the Government duly delivered. What did he say about yesterday's Budget? I shall quote from The Daily Telegraph today, in which he said:
The two budgets of 1993 may well be seen by future economic historians as paving the way for the better phase of Mr. Major's government in much the same way that the 1981 Budget laid the foundations for the good years of the Thatcher administration.
We may see a second golden era.
I shall end with a question. If we can achieve the Maastricht convergence criteria as set out in the Maastricht treaty—the Red Book shows that we shall probably achieve them—one wonders why we need to think about re-entering the exchange rate mechanism. What do we need a fixed exchange rate for if we can manage all that with a floating exchange rate? If we can achieve the economic convergence criteria—they are laudable criteria
intrinsically, although there is no target for overall public expenditure, and include low inflation, low interest rates and high levels of investment—with a floating currency, why do we need a single currency? I shall leave that one hanging in the air.

Mrs. Anne Campbell: As I have listened to the speeches of the past couple of days I have attempted to work out what the Budget is aimed at doing for the Conservative party. Much has been said about reducing public sector debt and something has been said, although not something explicit, about preventing the recovery from faltering, as it seems to be doing in many parts of the economy. I have concluded that the overriding aim behind the Budget is to keep Tory Back Benchers happy, and in that the Chancellor seems to have succeeded.
I should have liked to see a Budget that got people back to work, that boosted investment in industry and that built up Britain's manufacturing base, which has been sadly depleted over the past 14 years of Conservative rule. I should have liked to see a Budget that produced a fairer

society. I sometimes wonder what sort of society will emerge in the long term if Conservative policies continue. I have a little news for the hon. Member for Colchester, North (Mr. Jenkin). He seems to think that the Conservative party is a tax-cutting party but, under the Conservative Government, taxes will have increased from 34·75 per cent. of GDP in 1979 to 35·25 per cent. in 1994. The Government have also increased the percentage of the average family budget taken by taxes.
More serious than that, over the past 14 years society has become sharply divided. Today, the bottom one tenth is 14 per cent. worse off in real terms and the top one tenth is 62 per cent. better off in real terms. We can see the effects of that throughout our society. People are homeless and unemployed and pensioners and students live in poverty. There are great inequalities. The bottom one tenth of the population is paying 43 per cent. of its income in taxes while the top one tenth is paying 32 per cent. of its income in taxes.
The March Budget will make that division in society worse. The micro simulation unit of Cambridge university has estimated that the March Budget will hit the poorest one tenth by a further 3 per cent. while taking only 1·5 per cent. from the richest one tenth. More people at the top end will do extremely well for themselves and benefit from the Chancellor's largesse, while at the bottom end more and more people live in dire poverty. I do not want to live in such a divided society.
Yesterday, the Chancellor announced a package of help towards paying for VAT on fuel—a package obviously intended to keep Tory Back Benchers quiet—that will cost £1·25 billion, while the imposition of VAT on fuel will raise only £2·3 billion. Does the Chancellor really think that it is worth it, in view of the political backlash? I am glad that pensioners will have some protection, although I do not believe that the package will fully compensate the worse-off for the imposition of VAT on fuel. We have heard today that young families on income support will get 45p a week to cover an average £1·20 of extra cost. That will result in great hardship.
One group of people on extremely low incomes will get no help on the imposition of VAT on fuel. Students will not benefit one iota from the package of help.

Mr. Michael Fabricant: I have been listening with great interest to the hon. Lady. Does she not think that the 18 per cent. fall in the cost of fuel, primarily as a result of privatisation—that figure goes back to 1983, and the midlands has seen a cut of 5 per cent. in a year—will benefit students as well as older people?

Mrs. Campbell: I am sorry to say that it will not benefit students. Over the past 14 years, the spending power of students' grants has been reduced by 120 per cent. of today's spending power. We have to balance any fall in costs against increases in other living expenses and the general reduction in grants. Students often live in private sector rented accommodation that is badly insulated, with draughty windows and insufficient heating systems. Often, they are in no position to do anything about that. The coins in the meter by which they keep warm will be consumed at an unsustainable rate, throwing more students into debt and poverty.
Students are already badly hit by the fall in the value of the student grant, and an increasing reliance on loans means that students are leaving university many thousands


of pounds in debt. That will increase sharply over the next three years. I know that it will be viewed with alarm by those students starting their courses this year, and I declare an interest in that I have a son who has started a degree at Imperial college, here in London. Because London living costs are higher than costs in the rest of the country, students in London on a full grant will receive £2,845.
That is due to fall to £2,067 by 1996–97. That is a reduction of £778 during the next three years, and the Government are expecting students to borrow £778 to make up the shortfall. I hope that the Government have appreciated that that is not a one-for-one exchange. Those students whose parents will be able to make a full contribution—they include my son—will be able to borrow £778, as will those students who receive their grant from the state.
As many more students will take out the full loan than students who will draw a full grant, expenditure will increase. I will benefit from that, if I choose to reduce my son's grant to the same extent that the Government are reducing the grant to students who depend on grants. That is not a fair way of financing students and, although I shall benefit from it, I shall vote against the measure if I get the opportunity to do so in Committee.
Students will also suffer under the Budget from the increase in the council tax. Government Members will say that students do not pay the council tax, but that is not exactly true. I have received a letter from a constituent of mine, Mark Goodrich, who is the welfare officer of the Cambridge university students union. He points out that, in a household consisting of five students, no council tax is payable; similarly, in a house where five people are unemployed, no council tax has to be paid.
However, let us consider a household in which there are four students and one unemployed person. That household becomes eligible for the single adult rebate, so that 75 per cent. of the council tax is payable. The unemployed person, it is true, can claim back 20 per cent. of his share of the bill. That is one fifth of 75 per cent. which, I can tell Government Members, is 15 per cent. of the full council tax bill. That still leaves 60 per cent. of the bill to be paid by the four students.
It seems desperately unfair that households consisting of either all students or all unemployed people pay nothing, while those live in mixed households pay a high proportion of the bill. I am sure that the Government did not expect that to happen, and although it does not affect many people, it hits some people hard. Some of my constituents who are mature students and who live with non-students —their partners—are badly hit by that anomaly.
I have mentioned that matter twice before in the House, and both times I received the brush-off from Ministers. I hope that, on this occasion, I will get a more sensible answer, because this issue makes a great difference to the students who are affected by it. One way in which Ministers could remove the anomaly would be to make students eligible for council tax benefits. The issue affects very few students, but that measure would wipe out the serious problem cases.
I wish to talk briefly about women. The equalisation of the state pension age will lead to a deterioration in benefits for women aged under 44. Those women have been led to expect that they would receive those benefits from the

state. All hon. Members are aware that the equalisation at 65 has happened because of the £5 billion savings which it will create in the national insurance fund. It is a further reduction in benefits for women, in addition to those which have been already announced.
I remind the House that the pension was based originally on 25 per cent. of a person's earnings over the 20 best years of a career. It has been now reduced to 20 per cent. of earnings based on average earnings over an entire career. Periods of low pay are taken into account along with periods of high pay, and that will drag down the value of the pension. That will affect women primarily since, because of family commitments, they spend significant periods in low-paid, part-time employment. Women who have been penalised already by changes in the rules are to be further penalised by having to work until the age of 65 before they draw their pension.
All hon. Members will welcome the £28 a week which has been made available as a concession for child care expenses. I should like to draw the attention of hon. Members to the case of one of my constituents, who wrote to the Prime Minister. As is normally the case, the Prime Minister sent the letter on to me for a reply.
My constituent explained that she was a single mother, although she was not alone by choice. Her boy friend became violent and threw her out. She had a good job as a researcher and statistician, but she could not afford child care on her own. She was in a difficult position. She dared not sue her boyfriend for maintenance because she was afraid of his violence, so she gave up her job and claimed income support. That single mother costs the state more than £600 a month. However, she wants to work and does not want to stay at home and depend on state benefits.
My constituent explained that, when she was working, she took home £800 a month after tax, national insurance contributions, and so on. The largest expense by far was child care, for which she paid £450 a month, which reduced her income to £350 a month. She got no tax relief on her child care expenses. She explained that she would now need an extra £200 a month to bring her back to the low standard of living which she experiences at present while living on state benefits.
I am afraid that the £28 a week—welcome though it is —will not be sufficient to help my constituent and many women who are in her position.

Mr. Jenkin: Will the hon. Lady give way?

Mrs. Campbell: I have given way once, and I will not do so again because my time is fairly limited.
The concession is too little, too late, and will not help many women who have professional skills and who could make a contribution to the national economy, let alone those women who are able to earn smaller amounts of earnings. Another problem with the Budget is that 300,000 women have been brought into the income tax net, and women can also be affected by cuts in public expenditure.
There are 1,000 small businesses in my constituency which employ 15,000 people, so they are an important part of the local economy. Many of those small businesses are high-tech and are involved in leading edge technology, but I am concerned that they are not growing as fast as they should. There are various reasons for that, one of which is the lack of available finance.
I welcome the enterprise investment scheme to encourage direct equity investment. We must watch


carefully to see how that scheme works. The business expansion scheme started well and helped small businesses a great deal in its early stages. However, during the past few years the BES has been hijacked by property developers. Although the scheme has demonstrated that there is a lot of money around for investment, it has not had the effect that was intended when it was introduced.
Another measure relates to statutory interest payments for late debt, and the consultation paper that the Government are introducing on that subject. If a measure is produced to introduce statutory interest payments, it is important that it should be payable for several years after it becomes due.
Businesses often blackmail their customers by threatening not to provide further orders if their customers press for payment of debts that are due. It is important that we should avoid that situation.
The Budget has not extended the capital allowances that were introduced temporarily in the March Budget. I know that that would have been a popular measure with my small businesses. There are no further tax allowances for research and development and no proper schemes to improve training and education. Many small businesses in my area will see that as a sustained attack on people who are trying to run small businesses and compete directly with companies abroad.
Several measures in the Budget disturb me and I shall vote against some of those that I have talked about tonight.

Mr. Barry Legg: Lord Wilson said that a week was a long time in politics. Less than a week ago, in the debate on the Loyal Address, I spoke about the economy. I am grateful to you, Mr. Deputy Speaker, for calling me again this evening.
When I spoke last week, I urged a reduction in the control totals, action on the Budget deficit and a more confident stance by the Government on economic policy. Yesterday, when my right hon. and learned Friend the Chancellor of the Exchequer presented his Budget we made significant progress in all those areas. The control totals for next year were reduced by some £3 billion. As my hon. Friend the Member for Colchester, North (Mr. Jenkin) said, many Conservative Members had argued for that throughout the summer months right up to the Budget. The reduction is sensible in that it takes into account the lower inflation which has been achieved and brings greater discipline to the Government's finances. That is particularly important, but the Government have made only a beginning.
I am sure that my right hon. Friend the Chief Secretary to the Treasury has struggled long and hard to reduce the contingency reserve and to ensure that it is not consumed in the main estimates of departmental spending. With a sensible budgetary framework in place for the coming 12 months, it is up to Ministers to ensure that those targets are achieved.
The overall increase in the control total allows for an increase in cash spending of 2·7 per cent. That is a not insignificant sum when inflation is at such a low level. However, it will require a cultural change for Ministers and civil servants. The Times today published photographs of Ministers who had supposedly won and those who had supposedly lost in the spending round. As usual, the press regarded those who had contained their budget and

achieved savings as losers. There needs to be a fresh philosophy in the Government so that those who play a. part in achieving more cost-effective public services are recognised and rewarded.
There also needs to be a change in attitude among civil servants. Tight budgetary targets have been set. Now they must be achieved. This afternoon, my right hon. Friend the Chief Secretary referred to Lord Howe's Budget of 1981 and drew comparisons between it and my right hon. and learned Friend's Budget yesterday. It should be remembered that the 1981 Budget provided for public spending to fall by 4 per cent. in real terms over the subsequent three years. Today, my right hon. Friend presented public spending projections for real increases of ·25 per cent. per annum. Despite Lord Howe's good intentions, he could not achieve the 4 per cent. reductions over the following three years and public spending increased in real terms by some 5·7 per cent.

Mr. Ian McCartney: Unemployment rose by 2 million.

Mr. Legg: That was coming out of recession and into a period of sustained growth.
With a firm Budget set for next year, Ministers will have to work extremely hard to ensure that those spending plans are adhered to. Comments about efficiency and lower overheads must be made into realities.
The other welcome changes in the spending figures for next year are reflected in reductions in debt charges and in cyclical spending. That shows the merits of our overall policies. By getting down the overall level of borrowing we are driving down debt charges, and by coming out of recession we are getting a reduction in cyclical spending.
The Budget is being well received in the markets. Today, both the equity market—[Interruption.]—and the gilt-edged market responded positively to my right hon. and learned Friend's measures. Opposition Members may not care about the equity market or the gilt market, but I am afraid that they are living in the 1970s. The gilt market is important to the Government and to every business.
Today, long-term interest rates fell and the gilt market rose. That is good news for Government finances and for every business. Whether in the service sector or in the manufacturing sector. The long-term interest rates set by the markets determine the price at which businesses can borrow and plan for the medium and long term. That lies at the heart of our policies and is an aspect of economic policy that the Opposition choose to ignore completely.
The strategy of balancing the books in the medium term has now been established by my right hon. and learned Friend. When I spoke in the Queen's Speech debate, I said that the concept of reducing the public sector borrowing requirement towards balance over the medium term was too vague a policy objective. Yesterday, that changed. My right hon. and learned Friend introduced plans in the Red Book to balance the books. [Interruption.] Opposition Members may not like that, but if they open the Red Book and look at the figures, they will see plans to reduce the PSBR to zero. That will be good for the country, for the Government's finances and for business throughout the country.
Yesterday, my right hon. and learned Friend did not spend much time talking about monetary policy. Previous Chancellors have tinkered with monetary indicators, such as MO and M4. My right hon. Friend the Member for


Kingston upon Thames (Mr. Lamont) widened the bands for both those indicators to such an extent that they had little meaning as instruments for determining monetary policy. Yesterday's statement about underfunding the deficit next year by £7 billion was, however, significant and a welcome development in terms of monetary policy. It will help the liquidity of many businesses, which is vital to their expansion.
My right hon. and learned Friend rightly made disparaging remarks about forecasts. Many of our forecasting institutions and economists run forecasts based on models that do not reflect the matters that drive the British economy in the 1990s.
The adjustment of £7 billion to monetary policy—that is, 1·25 per cent. of gross domestic product—will be an important stimulus to the economy, which counters any suggestion from hon. Members that this is a contractionary Budget.
Spending plans have been reduced, but they do not result in an overall cut in expenditure—spending has been brought into better balance.
Confidence will flow from the Budget. I mentioned the reaction of the markets today, which the Labour party seemed to pooh-pooh. Unemployment will continue to fall and my right hon. and learned Friend's estimates for GDP growth in the Red Book have been modestly set. The output gap in the United Kingdom economy is probably at a significant level. Unused facilities, resources and people exist to take up the slack in the economy. I believe that we shall see above-trend growth over the next few years.
The overall success of the measures will not depend purely on monetary policy or on the Government being able to manage their machine more efficiently. Success will also depend on having a coherent long-term strategy for reducing the state's role, in step with people's aspirations. I was pleased that my right hon. and learned Friend yesterday reinforced our commitment, as a Government and a party, to reducing public spending as a proportion of GDP. That is one of our main priorities over the remaining period of the Parliament and in the run up to the end of the century.
My hon. Friend the Member for Colchester, North drew attention to the fact that many of the most successful economies in the world today have much smaller lower public sectors than the United Kingdom. I believe that my right hon. Friend the Chief Secretary also drew some parallels in his opening speech. Japan has a much smaller public sector as a proportion of national wealth—32 per cent. of annual GDP. The United States' public sector is about 35 per cent. of its GDP.
Opposition Members will be interested to learn that the hon. Member for Dunfermline, East (Mr. Brown) seems to be a convert to the concept. In his speech on the Gracious Address last Thursday—it appears in Hansard at column 602—the hon. Gentleman gave Taiwan as an example to be followed by Britain. He said that a larger proportion of young people went into higher education in Taiwan than in the United Kingdom. He seemed to suggest that we should follow the example of Taiwan. His suggestion probably reflects his usual intellectual laziness. Taiwan has a much smaller public sector, which has something to do with its economic vitality.
What is more, if the hon. Gentleman had bothered to do any homework, he would have found that all further education in Taiwan is financed by private loans—there is no state help for higher education students in Taiwan. I look forward to seeing the hon. Gentleman in the Lobby when we vote on issues relating to student grants. It is important to have a long-term strategy to reduce the size of the public sector as a proportion of national wealth if we want to have a successful economy.
I welcome the changes announced in the Budget on social security payments. My right hon. and learned Friend the Chancellor presented a generous and significant package to help with VAT compensation. The package was much more generous than any of the estimates that I saw in the press or from the Labour party. The total package is worth £1·25 billion, which is a success for grey power.
My right hon. and learned Friend the Chancellor announced changes in the level of retirement pensions over and above the inflation rate. He gave the House an assurance that that was a one-off measure and could not be repeated in later years, which was a wise and sensible assurance for him to give the House. Politicians must take fully into account the changing demography of British society. Demography has certainly changed enormously since Beveridge established the welfare state in 1945. At that time, those over 65 represented one in every seven of the population of working age. As we heard this afternoon from my right hon. Friend the Secretary of State for Social Security, there is now one person over the age of 65 for every three people in the working population. Therefore, the demography has changed.
The economics are also changing fundamentally—Opposition Members would do well to recognise that. Many elderly people retire on substantial occupational pensions which have grown significantly during the 14 years of Conservative rule. Those pensioners will have been pleased to see the developments in the markets today. They have become more wealthy and will have an opportunity to receive higher occupational pensions in future. In considering policies for the elderly and the social security budget overall, we must take into account demographic and economic changes that have occurred over the past 50 years.
I welcome the introduction of the job seeker's allowance and the new incapacity benefits. The aim of seeking to concentrate help on those most in need is the appropriate policy for any responsible Government. As my hon. Friend the Member for Colchester, North said, spreading universal benefits widely across the whole population weakens the amount of resources available to direct to those most in need. A high priority for Conservatives is to ensure that those in need receive proper allowances.
I support the proposals to equalise retirement ages announced yesterday, which was a common-sense solution to the European Court rulings. Hon. Members may be interested to know that the private sector has already taken the step of equalising retirement ages, and more than 90 per cent. of occupational pension schemes have equalised retirement ages at 65. The social security budget still shows substantial increases over the coming years. Opposition Members who suggest that Ministers are undermining the welfare state should turn to the Red Book and look at the spending figures on social security, education and health—all of which are increasing in real terms.
The renewed commitment that we have heard from my right hon. and learned Friend the Chancellor to reduce public spending overall as a proportion of GDP is vital. A sound financial foundation and a sound financial example set by the Government will heighten the prospects for enterprise and initiative within the economy as a whole in coming years and produce substantial economic benefits for Britain and its people.

Mr. John Garrett: The Chancellor's Budget judgment is that the economy needs a huge deflationary increase in taxation and an unprecedented cut in public expenditure just as we are coming out of recession. I assume that that is known as the new economics, but it is not an economic formula known to me in other circumstances.
The tax increases that will hit the ordinary taxpayer in the spring can only be called a tax bombshell, which will fall not only when the economy is slowly recovering when it should be gathering pace, but just before the local and European elections, which will bring just retribution to the Conservative party.
A family on average earnings will lose no less than £30 a month as a result of the action of a Government who are pledged to reduce the tax burden. By 1995-96, a married person earning £25,000 a year will lose £74 a month—£900 a year. That is also a formula for delaying recovery. But the full weight of the new tax-benefit regime will fall on invalidity beneficiaries, the unemployed and the nearly poor, who will, for example, have to pay VAT on domestic fuel without compensation.
I welcome the £28-a-week child care allowance, although it will not go very far. It is a useful antidote to the hysterical speech on the social cleansing of single mothers and scroungers that the Secretary of State for Social Security made at the Conservative part conference. Some 200,000 low-paid workers will be pulled into taxation for the first time as a result of freezing allowances, so that the weakest will again get it in the neck.
The increase of £1·6 billion in health spending is quite inadequate to cope with growing waiting lists and increased demand. The Secretary of State for Health said that she expects 2·25 per cent. in efficiency savings. I hope that she will tell us where those efficiency savings will come from. She really means that savings are coming from the standard of living of health workers.
Costs in the health service are driven by new technology and drugs, which far outstrip a 1·6 per cent. funding increase. Our health service is phenomenally efficient by international standards, and it cannnot be squeezed any more. Frozen pay in the health service and other public services simply means redundancies.
In my constituency advice surgeries, the biggest and most intractable problem is housing. In what was once an exceptionally well-housed city, there is now real housing stress and hardship. We can look forward to a substantial worsening of the situation. The cut of £300 million to the Housing Corporation, followed by another reduction of the same amount in the following year, will lead to a fall in the number of completions of some 13,000 dwellings and the loss of 30,000 improvements. It will lead to increases in housing associaton rents and a fall in work for the building industry.
The effect on local authority housing will be worse. Local authorities will take a £860 million cut next year, and that will mean more redundancies and substantial cuts in services that have a direct impact on the less well-off. New starts by housing authorities and housing associations in the last year of a Labour Government were more than 100,000. Today, new starts are 36,000. Public investment in housing has fallen by more than 20 per cent. in real terms since the end of the 1980s, and it is now lower than for the past 30 years.
I have never understood why the funds received from council house sales could not be used to build more rented housing. That would create jobs and provide homes. There has been a huge growth in poverty, noticeably in my formerly prosperous constituency where unemployment is now some 15 per cent., while 140,000 taxpayers on incomes of more than £80,000 a year have had an unbelievable bonanza of income tax cuts. We are heading for an American-type society, in which there is a vast gap between rich and poor. The differentials between the well-off and the poor are greater now than at any time since records were started in 1886.
There has been a steady weakening of our productive capacity. Investment is a smaller share of national income than at any time for nearly 40 years. Britain is 23rd out of the 24 OECD countries in terms of the share of national income devoted to investment. We are not investing for the future of our industry. Investment for each manufacturing worker is half that of Germany and Japan, and a third of that in America. With private and public investment still falling, that is a recipe for continuing depression in our economy.
All the policies embodied in the unified Budget depend for success on the eventuality of a recovery from recession over the next three years which is capable of offsetting rises in taxation and cuts in public services and infrastructure.
I am one of the few people who take an interest in the form of national accounts. The Budget is much less unified than one might think. It is really a standard Budget with less detail than usual, and simply a presentation of public spending heads. It will be followed by departmental spending reports which set out costs but never set out the outputs or objectives of spending, and estimates which are more or less meaningless for management purposes.
I am pleased about the shift to an accrusals basis of public spending. I remember proposing it to a Procedure Committee in 1969, but the Treasury then opposed it as impractical.
Much more work has to be done on our national accounts, given that, as Robin Butler said in an answer to a question by me in the Treasury Committee a week or so ago; we are moving from a central Government of 30 main Departments to a Government of 30 ministerial headquarters, 150 agencies, more than 1,000 quangos, trusts and boards and countless thousands of contracts that are all managed by companies that are out to make a profit.
Those changes make nonesense of Government accounts and wreck the accountability of Departments to, for example, the House and its Select Committees. That is worth mentioning. Public expenditure planning is simply becoming impossible as a result of those changes in the machinery of government. Unfortunately, the machinery of government has changed much faster than the machinery of scrutiny that Select Committees can bring to bear.
To return to the Budget judgment, as I started, it seems to me to be an exceptional gamble on recovery. It is a Budget that hits the poorest hardest. It depends on massive cuts in public expenditure, which were hidden in the Budget statement and will become apparent only when the settlement with local authorities is made. It imposes taxation on the greater part of our fellow citizens, and I very much doubt that that gamble will come off.

Mr. Tony Banks: It is always a pleasure to follow my hon. Friend the Member for Norwich, South (Mr. Garrett). I agree with every word that he said.
May I say, for the record, that I was absent from the debate earlier because I was attending a meeting of the Procedure Committee and I returned immediately after the meeting finished. One of the papers that we considered there was about the impact of a unified Budget. Although the Committee is naturally very supportive of a unified Budget, as we all are, we need to monitor the date carefully and to observe its impact, because there have been some complaints, especially by retailers, that in the run-up to Christmas it is not especially good for business to have to try to second-guess a Chancellor of the Exchequer, and consumers have the same problem. We ought to consider that carefully and perhaps think about another date if we feel that there has been some adverse impact on commerce and consumer patterns.
In recent weeks and months we have got used to hearing the phrase about getting "back to basics". The Prime Minister is very fond of using it. Two points occurred to me about that phrase. First, the Conservatives have been in power since 1979, which is 14 years. If we are to get back to basics, therefore, we need to ask who took us away from basics in the first place. Secondly, what on earth does the phrase mean? What are basics? When did basics begin, when did they end, and when was the golden age of basics?
I must admit that it is a very evocative phrase but, rather like its author, the Prime Minister, it defies objective definition. It can mean totally different things to different people. That is precisely the trick. Everyone can agree with it without contemplating the problem of ever having to agree with anyone else, because no one really knows what it means. It is a phrase that says it all but, at the same time, says nothing. It is vintage John Major.
I decided to try to get into the mind of the Prime Minister, a task that some people may say does not require the abilities of a Harry Houdini, but I am a little more charitable about the Prime Minister because, in my opinion, if the Prime Minister has in mind a golden age it must mean Brixton and getting back to the basics of the 1950s.
I can connect easily with that sort of image because I was also brought up in Brixton in the 1950s. We lived in a London county council home. The Majors, of course, lived in a privately rented mansion flat, as I understand, and we always used to envy them greatly. They were well-known nobs in the area, Mr. Deputy Speaker, I can tell you. It was, however, a time of great security, I am sure, for both of us although, mercifully, we were blissfully unaware of each other's existence.
There was little or no street crime in Brixton at the time. As kids we were able to play in the streets—I am sure that the Majors did not, because that was a working-class practice only. If anyone was unfortunate enough to be knocked over when we were playing in the streets, you could bet your bottom dollar that he would be knocked over by a car that was designed and built in Britain. It would be an Austin or a Morris Oxford; or, if he was very lucky, or perhaps unlucky, he could be knocked over by a Jowett Javelin. How I longed to be run over by a Jowett Javelin.
There were no beggars in the streets of Brixton in the 1950s, there was no one pushing drugs. Truancy was almost inconceivable and anyone who did it found that the school inspectors or the educational welfare officers would soon come round to talk with his parents.
To own a television in Brixton in the 1950s was a big deal. Anyone owning a black and white television was thought of as either being on the fiddle or a bit of a flash git, as my granny used to say. There was no real violence portrayed on the screen, nor were the minds of the young polluted by the obscenity of the violent sick videos and computer games that we have today.
To complete the idyllic picture of the Prime Minister's golden age of basics, this is the clincher. During the 1950s Surrey won the cricket county championship every year for six successive years; and Chelsea recorded its only league championship in 1954-55. It must have been the golden age of basics for the Prime Minister. I was lucky; I saw every match that Chelsea played in the great year of 1954–55.
However, when the Prime Minister recalls those times, he always manages to forget two things. First, unemployment in 1953 was 356,000 nationally—1·7 per cent. of the working population. London now has more unemployment—about 500,000—than we had nationally in the 1950s. There are now 2·8 million unemployed people in Britain—and that is the fiddled figure. If we take the 29 changes or fiddles into account, probably about 4 million people are unemployed.
There was no homelessness in Brixton in the 1950s. Local authorities at that time were building 239,000 homes. In 1992, local authorities built just 4,600 homes. It does not take a PhD in housing administration to work out why Britain has a housing problem.
In Brixton in the 1950s, in the Prime Minister's golden age of basics, security was based on employment. People had security, and jobs and a stake in society. When people have employment, they have something worth keeping. They have something that gives them a stake in our society. It is not surprising that street crime, truancy, single-parent families—all the things that are pointed out as problems in our society—did not exist in the same measure because people had the security of jobs.
The Chancellor's Budget speech contained little or nothing that really addressed the problem of unemployment. The only job that the Budget addressed was the job of the Prime Minister, which the Chancellor clearly covets. There he stood, all beer belly and hush puppy shoes, playing to the one electorate that really matters, the only one he needs for the future—the electorate behind him of Tory Members of Parliament who will be voting for a new leader of the Conservative party probably some time next year, and he obviously wants to be in the frame when that happens.
The Chancellor could have done a great deal for jobs in Britain and for London in particular. He could have done it by expanding the budget of the Department of Transport instead of reducing it by one fifth between now and 1996–97.
Last week in London we suffered one of the worst breakdowns in the Underground system that any city in the world has experienced. It was the worst one I can ever recall in London. It led to headlines such as "Enough is enough" in the Evening Standard. On Wednesday 24 November, about 20,000 people were trapped in the tunnels in trains and people were stuck in lifts. Millions of people failed to get to work or arrived at work late.
The Secretary of State for the Environment said that Londoners should stop whingeing. Instead of whingeing, they should storm No. 10 Downing street to do something about the calamitous state of London transport. How dare the Secretary of State tell Londoners that they should stop whingeing when we have such a crappy, clapped-out Underground system as we have today? He is lucky. If he thinks that we are whingeing, if he comes anywhere near my part of town in the east end of London, where we were without the Central line until Monday this week, Londoners are more likely to string him up than to start listening to his admonitions about whingeing.
It is all right for Ministers in their chauffeur-driven cars, with their red boxes and their civil servants brushing dandruff off their shoulders, moving around in the luxury that surrounds them while millions of Londoners struggle every day to make sense of an Underground system or a public transport system that is palpably breaking down. It ill behoves Ministers such as the Secretary of State for the Environment to say that Londoners should stop whingeing.
The Monopolies and Mergers Commission said that £700 million to £750 million a year is needed to produce an acceptable modern metro system. The previous Secretary of State for Transport promised £700 million a year for London Underground by 1993–94. However, one year later, that funding was cut by about 30 per cent. in the Budget. We are talking about cutting a budget that was estimated only to be able to keep things going and then make some improvements. To cut the budget by 30 per cent. means that so much work cannot be done now.
That is why London Underground broke down so badly. It turned out that the electrical fault lay in cabling that was 70 years old in some cases. We should not have a system that has 70-year-old cabling. We have rolling stock which badly needs replacing—

Mr. Jenkin: rose—

Mr. Banks: I will not give way to the hon. Gentleman because he spoke for ages and bored hon. Members rigid, especially me. I know the hon. Gentleman's father well. To show family values, the old man goes to the House of Lords and the son comes to the House of Commons. The Tories know all about family values. [Interruption.] The hon. Gentleman should sit there and take it because I can tell him about this place. There is no more unreceptive an audience than when it is made up of people who are simply waiting for the hon. Gentleman to shut up and sit down so that they can get up and speak. I have three minutes and I shall relish them, and the hon. Gentleman will sit there and listen.
The Chancellor could have said something about the Northern line. It is called the misery line [Interruption.] If

the Chief Secretary, with the bouffant hair, travelled on the Northern line instead of in his swish car, he might push forward the proposals to modernise the Northern line. Crossrail is now uncertain in London, and the Jubilee line extension is not the highest priority.
It is nothing to do with the transportation needs of Londoners—it is all to do with saving the bacon of Canary wharf and the developments of the London Docklands development corporation. It is developer-led; it is not consumer-led in terms of the transport needs of London. When will we get the channel tunnel rail link? The Chancellor could have talked about that. That has been pushed back.
Transport investment means jobs in the construction industry and in rolling stock manufacturing outside London. It saves billions of pounds in terms of congestion. If we had a modern metro system, people would use it instead of private cars. The Confederation of British Industry estimates that congestion costs London £10 billion a year.
A good public transport system brings environmental improvements. No economy can prosper without an efficient transportation system. Investing in London and national transport systems makes a great deal of economic, social and business sense. Anyone in the House who travels on London transport knows that its infrastructure is a disgrace.
The Government had a wonderful opportunity to say something positive in the Budget about investment in London transport's infrastructure and they failed. They have betrayed Londoners, and Londoners will get an opportunity to show what they think about the Conservative party and the Government when we get round to smashing the Conservative party in the local elections in May.

Mr. David Blunkett: I had a fleeting hope that the elusive Secretary of State for Health would turn up this evening to give us the benefit of her wisdom.

Mr. McCartney: She is out partying.

Mr. Blunkett: No, she is not out partying. She will be out doing a bit of late-night Christmas shopping, taking advantage of especially late opening hours in the build-up to Christmas. Instead, we have the Paymaster General and my old sparring partner, the bouffant boy, the Chief Secretary to the Treasury. I am delighted that the Chief Secretary is here tonight because his hand is on the tiller in terms of the ideology that is being followed.

Mr. McCartney: The "Portiller".

Mr. Blunkett: Yes, his hand is on the tiller as the "Portiller" and potentate of what is likely to happen to this country. A clear ideological thrust is hidden by how the "beer-swilling Chancellor" manages to freeze duty on beer and spirits, but places the duty on others to meet the Budget deficit.
Those who are unemployed through no fault of their own now find that their benefits and the time in which they can expect to receive back their own money are reduced. Six months is a poor return for people who have paid for years, through national insurance contributions, for the benefit to which they are entitled.
Conservative Members have undermined the Beveridge principle that people who pay in should have a right to benefits—not a benevolence, something handed down by others or something passed across because they happen to be in distress. They have undermined the key principle of full employment and the ability of those who have a job to contribute back into the Exchequer as well as look after themselves and their families. They have undermined individuals' responsibility for themselves and their families to earn a living through hard, rewarding work in order to contribute to themselves and their loved ones, but also to put back into the community, through contributing to tax and national insurance, money that can then sustain decent public services.
The crunch of the ideological difference between us is that Conservative Members, led by the Chief Secretary, believe that public expenditure is bad and undermines the fabric and backbone of society. They believe that a free-for-all, free-market economy in which people "do it yourself' in terms of gaining benefits and buying insurance is the direction in which this country should go. That mirrors in part the United States' experience, with insecure work, insecure prospects and a lack of stake in a community that values itself—a society in which people are threatened and their stability is undermined to ensure that they are willing to take lower and lower wages to manage to survive on the breadline.
If that is the sort of society we want, we shall continue with the policies that were enunciated yesterday. But if we want to build a society that believes in itself and can use its intelligence, rational thinking and experience of history to build up public services, the community and a sense of belonging so that people value those around them and understand their interdependence with others, we shall turn instead to the policies enunciated by the leader of the Labour party and the shadow Chancellor today.
The Budget deficit is entirely of the Government's making. It is their policy that has deliberately thrown away the receipts from North sea oil, the gains that were made through the hard work of the people in the pits, the steelworks and the engineering industry. The engineering industry is clinging on by its fingertips in the city part of which I have the proud pleasure to represent.
When reporters from the BBC ask people for their opinion on the Budget, do they ask the engineering industrialists of the north and Scotland; or the people who produce wealth by manufacturing products that can be sold overseas; or the people whose livelihoods depend on key public expenditure on essential services; or the people who produce equipment and materials—not rubber ducks, plastic gnomes or somebody else's champagne corks, but real things that people want to buy and can be sold abroad? Of course they do not. They ask what the City of London thinks about it, what happened to the index and whether people are confident. They do not ask the people who produce the real wealth of the country. We have lost touch with the reality of what is taking place on the ground.
The Government's claim yesterday that the health service had received a boost from the Budget was fraudulent. The Government knew perfectly well that what they were expecting from those working in the service, and those receiving its services, was a sacrifice to keep it going. If we take out the inflation figure, using the GDP deflator,

the actual increase is 0·9 per cent. If we take from that the amount that is being asked for in savings, £450 million —the same amount that was asked for in the current financial year, and mirrored savings of a similar amount that were requested in the previous financial year—we get a totally different picture.

Mr. Portillo: Savings produce more.

Mr. Blunkett: The Chief Secretary says that savings produce more. In other words, it is necessary to cut the service to reinvest in it. The Government produce saving targets, which the service can have back if it makes the savings.
The savings are not on senior managers' salaries, which have gone up by 211 per cent., or on those who have awarded themselves an average pay increase of 9 per cent. this year—ranging up to 137 per cent. in the case of one very favoured Conservative friend, who was the chief executive of Guy's hospital until it was merged.
It is not the people at the top who are being asked to save, but the people who will have their pay frozen in the coming year. It is those people who will be asked to save to fund the service. If the Chief Secretary strongly believes in what his right hon. Friend the Secretary of State for Health is doing, perhaps he will do us the honour of telling us so tonight.
What will be the increased charges and tax on the sick, through increased charges for prescriptions and dental treatment, and the withdrawal of exemption for certain groups in those categories? Perhaps the Chief Secretary or the Paymaster General will stand up and tell us when the announcement about the increased charges to those using the health service will be made, and how much the increase will be.

Mr. Portillo: We are not standing. We are listening to the hon. Gentleman's speech; we will be talking about Labour's policy later.

Mr. Blunkett: The Chief Secretary wants to talk about Labour party policies. He wants to talk about anything except Conservative party policies. He does not want to talk about the fact that there will be a reduction of £175 million in real spending on the health service in the coming year. By the Government's own statistical records, 1·5 per cent. of the health budget will be taken up by demographic change and changes in medical technology.
We are talking about a £175 million cut in the amount available for spending on the health service. That is not counting the £290 million for every 1 per cent. saved by freezing pay for the average nurse or doctor, and not counting the fact that the Government are virtually doing away with the pay review bodies. Evidence given to the Department of Health suggests that national pay bargaining should be replaced by local productivity agreements based not on what we understand to be fair remuneration for the average decent day's work by a nurse or doctor, but on what the evidence now describes as performance-related pay.

Mr. Portillo: I am driven to intervene in the hon. Gentleman's speech by the old relationship between us. I know that he wishes to conclude this part of his speech and to deal with Labour party policy. Before he does so, however, let me tell him that the amounts that we have added to the health service budget for the coming year will enable the service to treat 4 per cent. more patients. That


is in addition to a 60 per cent. increase in the number of acute patients receiving treatment since 1979, when the Conservatives came to power. Those are the facts. The hon. Gentleman should be concerned with the treatment of patients£with output rather than input.

Mr. Blunkett: I agree that it is a scandal that the Conservatives have lengthened the waiting list by 100,000 since the general election alone; that it has exceeded the 1 million mark in England alone for the first time; that waiting times went up by 25 per cent. in the first six months of the current financial year; and that the number of complaints rose by 37 per cent. last year.
The Secretary of State for Wales would take issue with the Chief Secretary on whether the Government could judge whether there would be a 4 per cent. increase in the number of patients treated. He rightly pointed out that the Government do not refer to patients as patients nowadays; they call them "episodes of care". They do not count patients. An "episode of care" may mean someone changing from one ward to another, or returning from theatre to a different bed in the same ward. The Government do not know whether there will be a 4 per cent. increase in the number of patients treated, because there are no indicators to provide the information.
The Government speak of "episodes of care", and of "provider units" rather than hospitals. They speak of "job seekers" rather than the unemployed. We are given everything except the truth. As the Secretary of State for Wales rightly pointed out in Monday's Times, we hear of "down-sizing" rather than mass redundancy. The Government engage in doublespeak; they speak with forked tongue; they say one thing and mean another.
The Government are cutting public spending, having promised that they would increase it. They have increased taxes, having promised that they would cut them. 'They are fraudulent, they mislead, and they have bamboozled the electorate; but they will do so no more. The electorate are wised up: they understand what is happening. A £1,000 million cut in housing provision will take its toll. That 8 per cent. cut will have an impact not only on those who are poorly housed or have no homes, but on all who want others to be decently treated£who believe in a health service which, as well as merely treating patients, prevents ill health from occurring in the first place.
We are against the Government's Budget because it imposes spending reductions on those least able to bear them. That is why we have continued to oppose the imposition of VAT on domestic fuel bills. The low-paid families—mothers at home with their children, for instance —will be hit by it, and there is no compensation for those who are just above the benefit level. They are earning and struggling: they get up at 6 am to go and do a lousy job that they would rather not be doing.
Those are the people to whom we shall be appealing. They are our natural constituents now. They are the people whom the Government have targeted with a tax on insuring their homes and their futures, and with a tax demanding that they should not expect—through national insurance—the comfort and security of the surrounding community when things go wrong. They should not expect support when the Government's policies make them unemployed; instead, they should take out private insurance. They should have to look after number one, if they can. That is

the united state vision of the future from a Chief Secretary to the Treasury who is obsessed with cutting public spending.
The Chief Secretary said that he would ring me on election day and he did. He was confident while he sat in an Italian restaurant. Next time, I shall ring him and I shall have a different message—that £16 a week on the budget of every family in the country will have spelt doom for the Conservative party's election chances. The cuts in education at school level—not what was announced yesterday, but what will be in the revenue support grant—the reductions in real spending, in real people's lives, in libraries, in schools, in care of the elderly, in social services and, as I have already mentioned, in housing will have spelt doom. The cuts will have to fall in local government. The cuts will fall in the day-to-day budget of every man and woman who know that the increase in taxes will bear on them.
The Labour party was honest and said that it would take from the national insurance contributions that the very rich avoid once their incomes exceed £22,000. The Government said that they would not raise national insurance contributions and instead levied them on those below the £22,000 level and thereby protected those above. Mr. Deputy Speaker, the Government have done it on every occasion—

Madam Deputy Speaker: Order. Perhaps I ought to tell the hon. Gentleman that it is now Madam Deputy Speaker in the Chair.

Mr. Blunkett: I only wish that I could tell the difference, Madam Deputy Speaker, as I wish that I could tell the difference between the Chief Secretary and the Secretary of State for Health, but I do not get close enough to either of them to be able to do so. In fact, it is now almost a year since the Secretary of State for Health had the temerity to debate with me over the Dispatch Box. Considering the catalogue of disaster that is hitting the health service, it is no wonder that she has been afraid to come to the Chamber since 26 January.
Take the announcement yesterday of a private sector investment in the Fazakerley hospital in Liverpool by SAS, the Scandinavian airline. It was fitted up by the previous regional chairman, who told the local trust to get ready for a £15 million investment through the health service, and, at the last minute, pulled the plug. He then came along with, guess what, a scheme, not a tender or a contract or an open bid for a 100-bed hospital, but a private deal—just like the appointment of the chairman of the Scarborough trust.
Nepotism, corruption, fiddling and fixing are rife—from the west midlands, where £10 million was squandered on a golden handshake and a "thank you" letter to the chairman of the region, to the squandering of £63 million in Wessex, to the £600,000 squandered by St. Thomas's hospital, whose director of finance and business manager flew to America to investigate the First Response company run by Richard Saig—since arrested—and failed to discover that the company was simply an answerphone. It is funny that he managed to travel first class to Grand Rapids, but never managed to discover that the company was an answerphone only. No action was taken. Nor was action taken when the estates division of the South 'West Thames region was sold off and one man made a £900,000 killing.
It is not the patients, the citizens, the low-paid or those who struggle to pay taxes who are the benefactors of yesterday's announcements in the Budget; it is the fixers, the friends of the Conservative party, the better-off, the people who do not need the health or education services or public housing or decent public transport, because they can buy their way out of the public squalor with the temporary and narrow private affluence that some people have gained from the past few years of Conservative government.
We have a different vision of the future, which is fairness in tax, fairness in the distribution of wealth and investment in public services. It is restoring confidence in people's right to a job and to decent treatment at work. It is ensuring that those who are unemployed do not have national insurance snatched away from them and that they do not have their rights taken away by a Budget that targets those who can ill afford to pay and protects those who can best afford to pay.

The Paymaster General (Sir John Cope): It hardly seems fair to intervene in the dialogue between my right hon. Friend the Chief Secretary and the hon. Member for Sheffield, Brightside, (Mr. Blunkett), but that is what I am supposed to do. I am sorry that the hon. Gentleman has not been able to secure an Opposition day for so long to raise the matters that he wanted to discuss with my right hon. Friend the Secretary of State for Health. I shall come back to what he said later in my remarks.
I want first to respond to some of the comments made earlier in the debate yesterday and today, especially about the matters for which I have responsibility under my right hon. and learned Friend the Chancellor of the Exchequer. My hon. Friend the Member for Bolton, North-East (Mr. Thurnham), who spoke yesterday, was disappointed that there was not a cut in beer duty to compensate for the cross-border effects. I noticed that the hon. Member for Brightside had the opposite opinion and believed that beer duty should be increased, but never mind.
Others also said that the effect of excise duties on the cross-border price of alcohol and tobacco in the single market was something that we ought to take into account. It is, indeed, something that my right hon. and learned Friend the Chancellor took into account in the Budget for the first time in a major way. He will have to give consideration to it in every future Budget.
There is a considerable difference in duty between the United Kingdom and some of our neighbours on the continent. The issue tends to be seen only in terms of our continental neighbours across the channel. Yet we also have quite a long land border with the Irish Republic. Land borders are, by their nature, much more susceptible to cross-border shopping than sea borders. Irish excise duties are basically higher than ours and the problem there is one for the Irish Republic rather than us. It is part of the whole picture of alcohol and tobacco duties, and our traders in Northern Ireland benefit from the present position.
The main attention has been on the opportunities for buying alcohol and tobacco across the channel. As the House will have realised, that is and will be a feature of Budgets, as my right hon. and learned Friend said in his Budget speech. There have been well-publicised stories in the press about firms just across the channel selling drink

and tobacco to British visitors. Of course we understand the attraction of that, but it is important to keep the whole thing in perspective.
In many cases, the goods can be purchased at considerably lower commercial prices, irrespective of the duty across the channel. That has been reognised and has been acted on by some firms in Britain to improve their position. That trade was to be expected. My right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) said in 1992 that the Exchequer might lose a total of about £250 million a year in revenue as a result of the single market. There have been claims that the volume of cross-border shopping has been dramatically greater than that which is implied by that estimated revenue loss. However, I have monitored the receipts of duty extremely carefully month by month, as the House would expect me to do. The fact remains that, if anything, those estimates look as if they were on the high side rather than the low side.
Various surveys suggest different increases in the legitimate trade but there is nothing to suggest that the loss is anything like as drmatic as some of the newspapers have suggested. It is nothing like enough to justify people saying, as they occasionally do in the newspapers, that we need to reduce the rate of duty in order to preserve the revenue. Even if the revenue loss from increased cross-border shopping were more than £250 million, if one considers that we get £5 billion on alcohol and £7 billion on tobacco from those duties, the House will realise that it is not something that enters into the calculations much.
There have also been references during the debate to the proposed air passenger duty that the Chancellor introduced in his Budget. That fits the Government's strategy of shifting at least some of the burden from direct taxation by broadening the indirect tax base, and it makes a contribution to tackling the budget deficit, which has been discussed so much in the past two days.
The tax addresses a sector where expenditure is currently subject to very little indirect taxation because of the VAT zero-rating and the use of duty free fuel by international aircraft and most domestic services. If that is compared with some of the areas of expenditure that we tax already, it can be seen that my right hon. and learned Friend was correct to say that that sector is lightly taxed.
Such a tax has therefore been suggested to us from time to time. People do not always understand why some other countries have had such a tax for so long while we have not. The fact that others have similar taxes means that we can organise the duty in such a way that there will not be a major compliance burdens on the businesses involved.
The new tax will be raised through the ticketing system and we attach particular importance to designing the mechanism that will account for the duty to fit in with the airlines' existing systems as closely as possible. It is proposed that the tax will apply to passengers departing from United Kingdom airports from 1 October onwards. It includes domestic flights and flights to the European Community, on which the duty will be £5. That covers rather than more than 60 per cent. of all passengers who fly from United Kingdom airports.
To protect the position of the United Kingdom's international hub airports, there will be an exemption for transfer and transit passengers. There is also a provision that those coming from, for example, Edinburgh through


Heathrow to another destination will pay only a single charge, which will depend on the final destination to which they are heading.

Mr. Blunkett: The Chancellor of the Exchequer told us all that yesterday afternoon. I remember him specifically talking about internal flights. Will the Paymaster General tell us instead why the Government have clearly broken their promise not to increase taxes?

Sir John Cope: I shall come to Labour's policies, our own policies and the election in a few moments. I was asked about details of the tax, and I think that it is important to put them on the record.
The other new tax that was proposed—insurance premium tax—goes on a sector that has been lightly taxed because of the exemption from VAT that it enjoys. My right hon. and learned Friend also spelt out some of the particulars of that yesterday, but the impact on households and industry of the insurance premium tax is important.
My right hon. and learned Friend mentioned some of the ways in which it would affect people. It would be about £35 a week for the average household. I can give more particulars to the House. The average tax on contents insurance, which about three quarters of households have, will come to about 6p a week, although obviously it depends on how large is the house and how elaborate are the contents.

Mrs. Helen Jackson: Did I hear the Minister correctly? Did he say that the cost per household of the tax on insurance was to be £35 a week?

Sir John Cope: No, it will be 35p a week. I hope that that is what I said. It is what I intended to say and it is what my right hon. and learned Friend the Chancellor told us yesterday. [Interruption]

Madam Deputy Speaker: Order. People might hear better if there were not private conversations going on.

Sir John Cope: Thank you, Madam Deputy Speaker. The tax will be due on all payments made on or after 1 October 1994. For policies that span that date, the tax will not be due if the premium has been fully paid before 1 October but will be due on any payments made after that date. The Finance Bill will also include specific measures to combat forestalling. It will not be possible to avoid the tax by making payments in advance of 1 October 1994 if insurance commences on or after that date. We also attach considerable importance to ensuring that the implementation of the tax is done in a way that gives rise to the minimum compliance costs either for the industry or for the Government.

Mr. McCartney: Will the principle that the right hon. Gentleman has just enunciated, that advance payments will still be subject to VAT, also be true about advance payments for gas and electricity? In other words, will advance payments for fuel made before the date of the introduction of VAT on fuel be exempt from VAT? If that is the position, people who can afford to pay a year in advance will get a tax rebate at the expense of others who have to pay quarterly bills in the normal way.

Sir John Cope: It is not on precisely the same lines as the insurance premium tax, but nevertheless the hon. Gentleman is right in principle. The normal VAT rules

apply. The tax point is when somebody pays, if they pay in advance, and that applies to VAT on fuel as well as to other matters in the VAT—

Mr. McCartney: That is the opposite.

Sir John Cope: On the contrary, it is similar to what I have just outlined with regard to the insurance premium tax. The tax point is when one pays but one cannot pay in advance for insurance that does not commence until after 1 October.

Mr. McCartney: Will the right hon. Gentleman clarify the matter precisely? Is it right that one cannot pay in advance to avoid VAT, whether on fuel or on anything else?

Sir John Cope: Yes, if one pays in advance for VAT for any purpose, and that includes for fuel, the rate of VAT that applies is the rate that applies at the time that one pays, as opposed to when the service is delivered. That is the normal VAT rule and it applies equally to fuel as to other matters eligible for VAT.
We are anxious to ensure that the compliance arrangements for the insurance premium tax are of the minimum possible cost and are designed with the fullest co-operation of the industry, to ensure that the burden is as small as possible. That is part of another of the themes of the Budget and of the Government—to ensure, through deregulation, that all taxation provisions are as user-friendly as we can make them. That includes VAT, and we have several proposals on that.

Mrs. Wise: Does the right hon. Gentleman understand that to impose a tax on people insuring their homes and the contents of them is oppressive? He said that three quarters of the population have insurance policies. Should not the Government, especially this Government who are always talking about people standing on their own feet, do something to encourage those who have not been able to insure their homes and the contents of them rather than penalising those who have?

Sir John Cope: The hon. Lady must make her own judgment about whether it is right that a large amount of expenditure for all people should be left out of the tax system in the way that insurance is. She knows that our philosophy has been to extend, and to some degree accelerate, taxation on indirect tax rather than taxation on income. The hon. Lady knows that, and the proposal is in line with that. I understand all that she says, and I understand also those who say that we should never extend taxes of any sort. At the same time, it is the duty of the Chancellor to look across the board and to see areas where taxation can be best raised. He must make his judgment on that, and whether that judgment is the same as the hon. Lady's is a matter for her also.
I was talking about deregulation, and the House knows that we have increased the registation threshold of VAT. We are also making proposals in connection with those businesses which are struggling to survive, and which have difficulties in paying their VAT. At the moment, those businesses which are in administrative receivership or are heading for being wound up have not been able to set off any of the VAT refund which they were due to receive against their VAT bills. We propose in future that they should be able to do so, as is the case under an ordinary voluntary arrangement under bankruptcy or liquidation.
Businesses which trade in that way but which are in difficulty have been able to offset the VAT under the extra statutory concession. We propose to write that into law to extend it as I have described. We are also proposing to complete the package of VAT reforms in the March Budget which deal with repayment supplement. I announced the other day some further improvements which will make it easier for businesses to qualify for the cash accounting scheme.
In the excise field, we have made a series of proposals. The first of those concerns gaming machine licence duty, a matter of considerable interest to some hon. Members. As those hon. Members will know, we are proposing to improve the administration of the tax and we published a consultation document about that earlier in the year.
There were some reservations about the proposals to abolish seasonal licences and the facility to surrender licences and to obtain a refund. Seasonal licences were introduced in the early 1980s. In fact, we have taken note of the reservations and we propose to continue both seasonal licences and the surrender provisions.
We propose also to reform excise law to make tax enforcement more effective. At the same time, some safeguards will be introduced in the form of the decriminalisation of minor breaches of the excise rules. The trader will be given the right of an appeal to a tribunal in the case of both excise and customs law. We are extending the power of the VAT tribunals to allow them to take on appeals from those areas as well. That is part of the modernisation of the customs procedure to bring it more in line with modern business methods.
I was interested in what the hon. Member for Norwich, South (Mr. Garrett) had to say about resource accounting and accruals. Speaking as a chartered accountant—

although one who has not practised in a long time—I believe that that is a most important sea change in Government finances, and that it has profound long-term significance.
My hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) seemed to touch on a similar point in his speech when he drew attention to the references to human capital in the Red Book. We propose to publish a document about resource accounting next year. In the meantime, studies have been set in hand on the matter under the new chief accountancy adviser. One important aspect of that—to which the House will have to pay great attention in due course—is the interaction with voting and the way in which accounts are presented to Parliament. We are drawing both the Public Accounts Committee and the Treasury Select Committee into the discussion on that subject.
Much else has been said, but I should return to the main theme of today's debate and, indeed, of the days of debate on the Budget. Yesterday was devoted to spelling out the Government's view of what should be done and the plans for doing it. The day following the Budget is usually the opportunity for Opposition parties to set out their alternatives. Neither the hon. Member for Newbury (Mr. Rendel) who spoke for the Liberal Democratic party nor the hon. Member for Dunfermline, East (Mr. Brown) who spoke for the Labour party took that opportunity. [Interruption.] The hon. Member for Newbury said that the Liberal Democrats would abolish mortgage interest tax relief. [Interruption.]

Madam Deputy Speaker: Order. I have spoken before about seated interventions. I expect the Front Bench at least to set some sort of example.

Sir John Cope: The Labour party—

It being Ten o'clock the debate stood adjourned. Debate to be resumed tomorrow.

Orders of the Day — PETITION

Child Support Agency

10 pm

Mrs. Alice Mahon: I beg leave to present a petition
To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
The humble petition of the residents of Halifax sheweth that they regard the Child Support Act 1991 as a failure, and believe that its effect upon single mothers on income support and on second families is injurious, that many women on income support have been left worse off through loss of passported benefits and that single mothers have been intimidated to authorise the
Child Support
Agency to pursue fathers of second families. This is grossly unfair and a serious poverty trap and the petition therefore calls on this House to abolish the Child Support Act and the agency.
Wherefore your petitioners pray etc.

To lie upon the Table.

Orders of the Day — Young Offenders

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wood.]

Mr. Warren Hawksley: I thank you, Madam Deputy Speaker, for the opportunity of raising an issue which is of great importance nationally as well as in west midlands constituencies. A debate on the subject of young offenders could range over many days. I intend to specialise in particular in cases in the west midlands which show that public concern is legitimate.
There has been a massive increase in the number of persistent young offenders in particular. That has led to the public outcry, which is fully justified, and to the courts and the police maintaining that they are powerless. They have joined the public in calling on the Government to take action soon and speedily.
Too many young offenders are going into court and leaving court laughing, not just at the judiciary but at society. They think that we are fools to let them get away with what they do. They appear persistently, time after time. I shall cite at length one case in Birmingham a few months ago.
In September, a 13-year-old appeared in court charged with 225 offences, mainly of breaking into cars, stealing cars or burglary of a comparatively minor nature, although the cost of the items that he stole totalled £23,000. The frightening thing is that, of the 225 offences, 175 were committed while he was awaiting trial at a so-called social services secure accommodation abode. He managed to leave the accommodation and commit many offences. Indeed, on one occasion he was re-arrested only three hours after being sent back there by the court.
The chief superintendent, John Jasper, who is in charge of the city of Birmingham centre area, said:
If I could lock up my hard core of six, I could reduce city centre crime by 18 per cent. and car crime by 30 or even 40 per cent.
He also commented that the magistrates were unable to help him to deal with the problem.
When the youngster eventually got to court, he was given 12 months' probation. Shortly afterwards, he was due to appear on a television programme that I was appearing on for Central Television. I arrived at the studio to be informed that, unfortunately, the youngster could not make it—he had been detained yet again by the police. I should think that the police were sick of spending their time chasing someone who was committing that number of offences.
I am not critical of the Government. The Home Secretary has responded to the problem. Following discussions, his speech to the Conservative party conference contained 27 points covering many of the issues that I had raised, including cautioning.
In my district of Dudley, the chief superintendent, contrary to what the chief constable had thought could be done, suspended cautioning. The chief superintendent said that the small print stated that cautioning could be suspended in cases of extreme need. The number of house burglaries, car burglaries and joy-riding in his area led the chief superintendent to believe that he had the right to suspend cautioning. The results were interesting: in


Dudley, joy-riding fell in the first four months from 248 cases a month to 97—a success for the suspension of cautioning.
The Government are right to look at bail-breaking. Too many offences are committed by those on bail. When my hon. Friend the Minister replies tonight, I hope that he will be able to give a guideline not just on whether serious offenders who are likely to reoffend will be denied bail. I hope that he will also consider more persistent and perhaps minor offenders, because they waste a lot of police time and cause a lot of inconvenience and concern to society.
I also hope that the Minister will be able to give us some idea of when he hopes the secure accommodation for such youngsters will be available. It is important that society knows that it will not have to wait much longer for those people to be denied the way of life that they are pursuing.
It is also important that the age of criminal responsibility is considered again, because I believe that many eight-year-olds know the difference between right and wrong. At that age, if they are persistent offenders, they should be treated as young criminals, and they should be prosecuted for offences that they commit.
One issue involves social services more than the Home Office. It is the most important aspect of the issue of young offenders. I served in the early 1970s as a member of Shropshire county council's social services committee when it first became responsible for dealing with young offenders. We took over the running of homes that had formerly been Home Office-approved schools. In the past 20 years or so that social services have been responsible for the way that young offenders and young children are looked after, they have failed. The time has come for the Home Office to be given responsibility for the treatment of those youngsters.
From my files, I have taken out some newspaper headlines from around the September period. They read:
Ram-raid boy on safari",
Yobbo sent on sailing jaunt",
Bailed youth sent to Jamaica"—
he was on five counts of arson at the time—
Car thief was sent on £20,000 holiday",
Yobs taken on £34,000 hols by care workers",
11-week camping trip to Portugal
and
2 months rambling through France".
Are those punishments? the law-abiding youngsters in my constituency wonder why they stay law-abiding.
I coined a phrase which seems to apply today—nick a car, grab a social worker and go on holiday at our, the taxpayers', expense. That must stop. It is essential that the sort of holidays given to those youngsters are seen as undesirable. The director of social services for Shropshire told me that money was being saved by sending youngsters on such trips.
I asked how much was being spent. The answer that I was given was that £1,600 per child per week was being spent. When I asked whether that was saving money, he said yes. I confirmed with Dudley social services that to keep a child in care costs about £2,200 a week. That is unacceptable, when we consider that a person can be kept in prison for about £260 to £270 a week. I cannot understand why it is necessary to spend so much on these children.
I am concerned that social services are using these private homes. The Bryn Melyn home at Bala has been involved in many of the cases that I have quoted. People have been sent to Portugal, and a girl was sent swimming with dolphins. I am not sure whether that was in Ireland or Israel: it may have been both. They have sent people to France and Eire. I asked, "Do these trips succeed?"

Mr. Christopher Gill: My hon. Friend may be interested to know that the mother of a youngster who was sent to Portugal said that it was a total waste of time and money. Who should know better about the effect of that so-called punishment on the young person than the mother?

Mr. Hawksley: I thank my hon. Friend for his helpful comment. The mother was right, and, yet again, social services were wrong.
The youngster has returned. When he was there he was, I was told, doing a computer studies programme. I am advised that, unfortunately, they sent the wrong programme, so he spent most of his time scuba diving and, apparently, getting badly sunburned. I was worried that Shropshire county council might be sued because of the sunburn that he suffered.
After his return the Express and Star reported:
A Midland teenager car thief has admitted going on a crime spree only weeks after returning from a £20,000 trip to Portugal designed to reform his behaviour.
He was back in Telford court with a list of charges against him. As well as that, he managed to escape from the court, and had to be arrested yet again. Surely such people should be locked up for some time.
I hope that social services will look at the way establishments in which such as Bryn Melyn are run. Are qualified social workers sent on these trips, and if so, what interest do they take in what happens? The director of Shropshire social services department said, "Well, it is up to Gwynedd. It has approval for running the establishment."
The Home Office should take over the responsibility of running these establishments and for the care of young offenders. The madness of holidays and the rampaging of persistent offenders must stop quickly. Over the 20 years that social services have had responsibility, they have failed badly. Let us treat these persistent offenders as young criminals and stop their holidays. Lock them up quickly, so that the property of our constituents is safer.

The Minister of State, Home Office (Mr. David Maclean): I am grateful to my hon. Friend the Member for Halesowen and Stourbridge (Mr. Hawksley) for giving me the opportunity to hear the views of hon. Members on juvenile offenders and for giving me the chance to state plainly Government policy in this area. I am also grateful to my hon. Friends the Members for Stevenage (Mr. Wood), for Gravesham (Mr. Arnold) and for Ludlow (Mr. Gill) for being present throughout the debate, and for similarly pressing me on these matters. Their constituents have exactly the same concerns as those of my hon. Friend the Member for Halesowen and Stourbridge.
The Government's first duty is to protect the public: that must always come before anything else. From that perspective, there is no doubt that there are currently gaps in courts' powers for dealing with juvenile offenders, particularly those who are under 15. My right hon. and


learned Friend the Home Secretary recently announced that the Government intend to give the courts the powers they need to deal properly with alleged and convicted offenders of all ages, and that includes juveniles. If that means custodial sentences, so be it.
Critics of these options often talk of secure institutions as colleges of crime. But at present, persistent juvenile offenders are at large committing crimes openly on our streets in front of other children, giving them hands-on experience.
In my view, street corners must be more efficient universities of crime than any prison, because the prisons contain only those criminals who are unsuccessful enough to have been caught. The best teachers are still at large.
Let it be made clear: on those street corners children are not learning to steal Smarties or to scrump a farmer's apples. Those children are embarking on serious crimes, often with serious implications for their victims, who are often other children. Stealing a car, driving it dangerously, putting the lives of other people at risk, is a serious crime. Burgling a home, often one that is lived in by a defenceless older person, is a serious crime. What should we do with the juvenile who commits such a crime not once, not twice, but over and over again?
We could relate stories of such offenders; the 15-year-old in Sunderland who already has 55 convictions and who the police believe is responsible for almost 50 per cent. of crime in the city centre; or the 15-year-old in Bexleyheath who has already been convicted of 18 burglaries, two thefts, three criminal damage charges, an assault and riding in a stolen car. Tonight we heard another frightening example from my hon. Friend the Member for Halesowen and Stourbridge, of a juvenile offender, a youngster, with an horrendous record of criminality at that young age.
We do not need to be guided, however, by those individual stories, because the same message is coming out loud and clear from throughout the country. There is a hard core of offenders—not thousands, but only hundreds—with whom the system is quite unable to cope, but that small number of offenders just do not respond to what is currently available.
For those young people who continue to offend in spite of high-quality community schemes, there needs to be a custodial option. For 12 to 14-year-olds, the secure training order will be that option. For 15 to 17-year-olds, detention in a young offender institution is already the custodial option, thanks to changes that were made to the criteria for custodial sentences by this Government in the Criminal Justice Act 1993. So the courts will get real powers to deal with those juveniles whose offending has got completely out of control.
I remind my hon. Friends that we intend to introduce proposals for a secure training order. That will be a new sentence for 12 to 14-year-olds who have persistently offended and failed to comply with supervision in the community, and whose offending is so serious that only custody will do.
It is intended to be a determinate sentence for between six months and two years, one half of which will be served in a secure training centre and the final half under supervision in the community. We want the new sentence to provide good-quality regimes that are designed to educate the young people, to tackle their criminal behaviour and to equip them to lead a law-abiding life in the community.
For the older age group, the 15 to 17-year-olds, the sentence of detention is already available, but the maximum length of that sentence, detention in a young offender institution, is currently limited to 12 months. We believe that that places an unnecessary restriction on the courts, and the Government believe that they should have greater powers to pass longer sentences where necessary. We therefore intend to double the maximum sentence from 12 months to two years.
I intend to put firmly on the record the fact that, for many juvenile offenders, custodial responses will not be necessary. The figures demonstrate that plainly. One hundred and forty-two thousand 10 to 16-year-olds were known to have committed offences in 1992, of which 80 per cent. were cautioned, 8 per cent. were given a community sentence, 3 per cent. were fined and 1 per cent. only were detained in young offender institutions.
The same picture, I might add, is true in relation to adult offenders. Of all the adults who were convicted last year, 73 per cent. were fined, 10 per cent. were cautioned, 4 per cent. were given a community sentence and 3 per cent. only were sent to prison. It is therefore nonsense for the Government's critics to claim that "Lock them up" is our only policy either for adult offenders or for juvenile offenders.
Protecting the public, of course, requires consideration of the long term as well as the immediate future. Many youngsters commit crime, and most grow out of it. That is why the Government have developed over the past 10 years measures which deal with juvenile offenders without automatic recourse to the courts or to custodial penalties.
The response to the first offence is often a caution. That is fair, and it works for a large number of offenders. Cautioning has been successful in most cases. Recent evidence shows that 87 per cent. of those cautioned are not reconvicted within two years. A caution gives a clear warning to the youngster that his behaviour is not acceptable. It gives him a chance to stop that behaviour.
However, there has been far too much repeat cautioning and cautioning for serious offences, and that is not acceptable either. That is why my right hon. and learned Friend the Secretary of State has issued new draft guidelines on cautioning.
Many offences are committed while the youngster is already on bail for previous alleged offences. In the next criminal justice Bill, we intend to introduce measures to reverse the presumption of those who are charged with an offence while out on bail for a previous offence.
To be effective in stopping offending, the punishment needs to follow the crime as quickly as possible. Delays in the justice system must be minimised. Inter-agency arrangements to reduce delays are already in place. The pre-trial issues steering group comprises representatives from the Home Office, the Lord Chancellor's Department, the Crown Prosecution Service, the Justices' Clerks Society and the Association of Chief Police Officers, and it has set time limits for the various stages of criminal proceedings.
The targets for juvenile offenders are more demanding that for adult offenders, and there are already areas in the system where delays for all cases are being reduced. For example, in 1992, the period from first listing in magistrates courts to completion was 67 days. By June 1993, it had fallen to 53 days. It is important that we get juveniles to court as soon as possible to be tried for the offences they have committed.
We have also enhanced the range and efficiency of community penalties by extending attendance centres, introducing a wide range of requirements to supervision orders, and developing tough national standards for the supervision of offenders in the community.
We continue to support effective supervision in the community. Only last week, I opened a centre in Wandsworth which provides supervision and support in the community for alleged juvenile offenders on bail and convicted juvenile offenders subject to community sentences.
Many community approaches have been developed in recent years, and many of them work well with juvenile offenders. However, community-based schemes have sometimes sought to keep young people out of custodial establishments as if it were an end in itself rather than a means to the more important end of reducing crime.
Successful community schemes must provide an individualised and intensive programme for the offender. The programme must get to the heart of the individual's offending by addressing particular difficulties, whether it is drinking too much, lack of self-control, trouble managing money or whatever.
Community penalties must be just that—penalties. They will not have the confidence of the public or of my hon. Friends or myself unless they make the necessary impact on the offender. They must not be perceived as a soft option, or even as a holiday. Supervision in the community must not send out the wrong signals. Children must not be allowed to think that, if they embark on a life of crime, all they will get is tea, sympathy or holidays abroad.
Although a cushy foreign holiday is clearly an unacceptable and wrong response to offending, in some cases physically demanding activities can be a most effective way of instilling much-needed discipline into the lives of young offenders. I can see some merit in the kind of outdoor pursuits which could provide some young offenders with character-building opportunities, and I should be interested to hear from organisation with ideas on appropriately tough and demanding schemes. Links with private enterprise would be vital for the offenders concerned, to take the gains of their outdoor experiences into the world of work.
Community schemes must reflect the disciplines of working life. They must place responsibilities on the offender to attend and participate, with failure to do so leading to a speedy return to the courts.
The Government have already started the work of improving community penalties by setting national standards. These standards are now being reviewed, so that offenders ordered to serve community sentences receive proper punishment. Those improvements are crucial to the success of community penalties. Without them, the support of the police, clerks, magistrates, judges and, above all, the public will not be sustained. All those people must have faith in the penalties.
There is now more than ever a need for community penalties to be based on creative partnerships between statutory agencies and voluntary organisations. Local authorities, the probation service and the voluntary sector

must pool their skills, traditions and resources to ensure that projects comprising community penalties are of the highest possible quality.
I am keen that the business world should be involved in skill training and other work with offenders to forge the links with employers which will be crucial in determining the success of an ex-offender's return to the job market.
I must tell my hon. Friends who did not manage to participate in the debate that the Government are not relying on those measures alone to deal with juvenile offenders. Action must be taken at all stages of the cycle of offending juvenile behaviour.
The most important responsibility for ensuring that children grow up to respect the law rests with their parents. Some families need help in achieving that, and the Government have already acted in the Children Act 1989 to require local authorities to provide facilities for children and their families to receive guidance.
In that context, the Government have helped the voluntary sector to develop family support services such as home-start, the family services unit and the family centre network, and we are now encouraging local authorities to use those services.
Those parents who do not take their responsibilities seriously must be required to face the consequences of their children's behaviour. The Criminal Justice Act 1991 increased parental responsibility in a number of ways. First, it strengthened the power of the courts to make parents attend court in cases involving offenders up to 17 years of age; secondly, it made parents pay fines and compensation arising from the young person's offending. We consider making reparation and compensation to the victim of great importance.
Thirdly, the Act contained greater power for the courts to bind over parents to control their children if that will stop further offences. Fourthly, it allowed bind-over orders to be imposed for up to three years or to the offender's 18th birthday. Fifthly, it provided fines of up to £1,000 for parents who refuse to be bound over without good reason. But more may be able to be done. Therefore, the review of community-based sentences, which my right hon. and learned Friend announced in his speech on 6 October 1993, will include an assessment of how to strengthen parental involvement in such sentences passed on their children.
Offending often begins while children are truanting from school. The Department for Education has taken steps to ensure that schools get to grips with truancy, keeping proper, published records of the problem. Poor behaviour in schools can often be a sign of offending to come. Schools will be inspected on their standards of discipline and behaviour. Those children who are excluded from school will not then be allowed to slip through the education net. Education authorities will be required to develop comprehensive plans to educate pupils who are not attending school.
As my hon. Friend told us, some offending occurs while the juveniles concerned are absconding from children's homes. In April this year, the Department of Health issued guidance on permissible forms of control of young people in children's homes. This makes it clear that staff in all children's homes are expected to control the children in their care; to take positive action to prevent children who are detained by order of the courts from running away; and to take appropriate action, which may involve the use of physical restraint, to prevent the child injuring itself or others, or damaging property.
Of course, offending can also begin when a young person finds nothing constructive to do. Crime prevention is of prime importance. Crime concern, which was set up by the Government five years ago with annual Government funding, has created and developed a number of schemes to divert young people from crime.
They include projects to give children on high-crime estates some supervised activity outside school hours, and schemes to keep young people out of trouble during the long summer holidays. In Bristol, a programme of summer activities for young people led to a drop in crime of 29 per cent. on a particular estate and savings of £9,000 to the local authority housing department on petty damage. Crime concern is now beginning to work with young people in their schools to address crime issues.
The Government also set up the safer cities programme. Since it began, the programme has supported more than 3,000 local crime prevention schemes, with funding in excess of £20 million. For example, a motor education project in Bradford led to a reduction of 60 per cent. in the number of new juvenile car crime offenders coming to the notice of the police.
The Salford safer cities project gave grant aid of about £1 million to 200 local crime prevention and community

safety initiatives, to the benefit of all sections of the community: 47 of those schemes involved assistance in providing constructive activities for young people at risk of involvement in crime.
I appreciate the attention of my hon. Friends who are present for this debate, and I hope that they agree that the Government's action to deal with juvenile offenders, which I have briefly outlined, represents a sensible and balanced response to the problem. We welcome new approaches where they can be shown to be effective, but we do not shrink from using custodial powers where they have, sadly, proved to be necessary with young offenders.
My hon. Friend the Member for Halesowen and Stourbridge can warn the hooligans he mentioned that their days of thumbing their noses at the courts are coming to an end, their days of rampaging through the streets are numbered, and the days of more peace and quiet for his constituents—

The motion having been made after Ten o'clock and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-nine minutes to Eleven o'clock.